by Joe Hearn | May 17, 2011 | Medicare, Social Security
Every year, the Social Security Board of Trustees reports to Congress on the fiscal health of the Social Security program. Not surprisingly, high unemployment and a wave of retiring baby boomers have put a heavy strain on the program. Benefits being paid already exceed tax revenues collected and in their 2011 report, the board estimated that the program will only be able to pay promised benefits through 2036 (one year earlier than previously estimated). At that point the Social Security trust fund will be exhausted and revenue from workers will only be able to pay about 75 percent of promised benefits.
As grim as that sounds, the problems with Medicare are worse. Thanks to higher health care costs and lower payroll taxes, the Medicare Board of Trustees now expects the Medicare trust fund to run dry in 2024 (five years earlier than previously thought). The difference between promised benefits and estimated funds available is roughly $37 trillion.
What does this mean for you?
In all likelihood, your taxes will be going up and your benefits will be going down. Those close to (or in) retirement, will see fewer changes than those with a decade or more to go, but in my opinion, no one will be immune. The problems are just too big. If you’re in your sixties you will probably receive most of what was promised to you. If you’re in your forties, you won’t be so lucky. Plan accordingly.
by Joe Hearn | May 16, 2011 | Pursuits, Retirement
In his wildly popular book The 4-Hour Workweek, Timothy Ferris told the story of Vilfredo Pareto, an economist who lived from 1848 to 1923. Unless you’ve read that book, you’ve probably never heard of Pareto, but you’re probably familiar with his most famous economic theory, the “80/20 Principle.” Also known as “Pareto’s Law,” it basically says that 80 percent of the outputs result from 20 percent of the inputs. It can be applied almost anywhere. 80 percent of the people produce 20 percent of the wealth. 80 percent of the profits come from 20 percent of the customers. Basically, 80 percent of the results flow from 20 percent of the effort.
How can we apply this to retirement? After working a 9 to 5 job for the better part of forty years, there is a real temptation to measure your daily progress by hours spent as opposed to tasks completed. If you don’t have a “full day” there is a latent guilt that is carried over from your days of trading time for money (I give my boss forty hours and he gives me a paycheck.). To avoid that feeling many retirees fill their days with busywork.
If you’re going to have a meaningful retirement, you need to embrace the idea that your goal is not to have a busy day or a full day, but a day spent on things that produce results (e.g. meaning, fulfillment, purpose, fun, happiness). In other words, don’t focus on time. Focus on tasks. Ask yourself, what part of your day is done simply to busy yourself and what part is actually going to get you closer to your goals and give you a sense of accomplishment and purpose. If Pareto’s law holds true, you should be able to cut about 80 percent of the busywork from your retirement schedule and focus on the 20 percent of tasks that are actually worthwhile. The payoff comes not only in the form of a more relaxing retirement, but a more meaningful one as well.
by Joe Hearn | May 14, 2011 | Hobbies, Pursuits, Retirement
No matter what exciting plans you have for retirement, you will still have a good many maintenance type activities that pop up on your calendar every day or every week; things like sleeping, eating, paying bills, going to the doctor, getting groceries, mowing the yard, and cleaning the house. While important, these things don’t really add much significance to your life.
To find meaning and significance, you will want to focus on milestones. Those are the things that, when done, give you a sense of purpose and accomplishment. Milestones tend to fall in areas like family, relationships, education, adventure, community, hobbies, travel, and health. When reflecting on your life, the milestones will be the things that stick out. They will be the things that you are most proud of. The maintenance will just fade into the background. Because of that, do everything you can to condense, consolidate, minimize, or outsource the maintenance so you can be free to spend more of each day focusing on milestones.
by Joe Hearn | May 14, 2011 | Pursuits, Retirement
As you move toward retirement, consider the merits of building a life that is light on fixed assets and heavy on experiences. When younger, most people want a bigger house to fit the kids and keep up with the Joneses. They want to live in a great neighborhood with great schools. The same logic is used when purchasing cars. Bigger and more expensive is better, safer, etc.
Unless you have enough money to fund both, retirement should be focused on the experience, not the asset. The wisdom of age should have taught you that life isn’t all about who has the most square footage or the biggest car collection. Contrary to popular belief, he who dies with the most toys does not, indeed, win. In all likelihood, he who dies with the most toys is a bit of a jackass. A life spent in dogged pursuit of rich experiences and meaningful relationships can be infinitely more rewarding than one spent focused on the acquisition of more stuff.
by Joe Hearn | May 10, 2011 | Social Security
If you are eligible to receive Social Security benefits, you can begin collecting reduced benefits as early as age sixty-two. As you can see from the chart below, however, most people (all 78 million baby boomers included), will need to be on the downhill slide to seventy before becoming eligible for full benefits.
| Year of Birth | Full Retirement Age |
| 1937 or earlier | 65 |
| 1938 | 65 and 2 months |
| 1939 | 65 and 4 months |
| 1940 | 65 and 6 months |
| 1941 | 65 and 8 months |
| 1942 | 65 and 10 months |
| 1943-1954 | 66 |
| 1955 | 66 and 2 months |
| 1956 | 66 and 4 months |
| 1957 | 66 and 6 months |
| 1958 | 66 and 8 months |
| 1959 | 66 and 10 months |
| 1960 or later | 67 |
| |
*Source: Social Security Administration |
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