United States: Your Retirement Date: Expectation vs. Reality

Last Updated: January 29 2015

Spy Game (2001) is all about retirement: Nathan Muir's last day at work at the CIA. Muir (Robert Redford) has a protege, Bishop (Brad Pitt), who's been thrown into a very unpleasant prison in coastal China.

Muir calls his broker and tells him to sell all of his assets, raising $282,000 to bribe a Chinese official to cut off the electricity to the prison for 30 minutes, during which time Muir calls in a team of Navy SEALS to liberate Bishop.

Flashbacks take us to East Berlin and Beirut, but most of the film is set at Langley, following Muir through a last day at work before retirement. It's not easy to clean out your office while planning a covert operation a hemisphere away.

Even if you don't work at the CIA, retirement can happen unexpectedly, and it's important for clients and advisors to bear that in mind for financial and estate planning.

I wanted to obtain more data on when clients expect to retire, compared to when they actually do retire.

Excellent, recent data on this question is available in the 2014 Retirement Confidence Survey (RCS) of 1,000 workers and 500 retirees undertaken and analyzed by the Employee Benefit Research Institute.

In certain respects, the EBRI data is quite sobering. It turns out that many Americans have virtually no assets aside from home equity. Specifically, in 2014, over half of RCS respondents had less than $10,000 in financial assets.

When I considered Figure 17 and how bleak the retirement security picture looks for the workforce as a whole, I thought I'd found an out. Figure 17 is for workers, which naturally includes younger workers who haven't had time to build assets yet.

Surely the financial security of retirees is better?

A noble hope. But the picture doesn't improve materially for retirees, as shown in Figure 18. Even by the time they finish working, 46% of retirees have less than $10,000 in financial assets. In contrast, only 28% of retirees have $100,000 or more in financial assets.

"The RCS bears out the positive correlation between human capital and financial capital we've already discussed: total savings and investments increased sharply not only with household income, but also with education and health status.

(As a side note, I believe the comparative impoverishment of over half of the electorate has long term implications for the "optics" of how "large" (i.e. adequate) retirement plan balances will be viewed by politicians and treated in the political process. Future posts will develop this idea more fully.)

Does the difficult/bleak/scary asset base of workers heading toward retirement influence their planned retirement age? It does, as shown by Figure 32 below.

During the past 20 years, the trend has been that fewer workers plan to retire before age 65, while more plan to retire in their late 60s, 70s, or "never".

Even though workers intend to work longer, that's not what's been happening. Instead, they've been leaving the workforce earlier, as shown in Figure 33 below.

Indeed, as Figure 34 shows, workers are 7 times more likely to retire before they expect than they are to retire after they expect.

The RCS noted that "one reason for the gap between workers' expectations and retirees' experience is many Americans find themselves retiring unexpectedly".

Reasons cited by RCS respondents for departing the workforce early tended to fall into two categories: health problems and work problems.

Health-related early departures or disability were a factor for 61 percent of the respondents. Care for a spouse or another family member was a factor for 18 percent.

Work problems changes at their company, such as downsizing or closure (a factor for 18 percent), changes in the skills required for their job (a factor for 7 percent) or other work-related reasons (a factor for 22 percent).

Of the respondents retiring early, only 26 percent cited being able to afford an earlier retirement as a factor in their decision.

The RCS confirmed what Lee Eisenberg noted in The Number his excellent 2006 case study of retirement planning: the post-retirement reality of part-time or consulting work in retirement rarely lives up to pre-retirement expectations.

The percentage of workers planning to work for pay in retirement now stands at 65 percent, compared with just 27 percent of retirees who report they worked for pay in retirement.

I believe the upshot of the RCS data is that realistic life cycle estate and financial planning will at least consider a "stress test" version in which you exit the workforce in your early 60s.

Flexibility in planning is a valuable response to the gap between expected and actual retirement dates shown in the RCS data.

First, you should seek to fund your core (more basic) lifetime retirement needs by age 60. Savings from income earned after age 60 can fund "extras" such as travel, education funding for grandchildren, or philanthropy.

Second, decisions about paying for children's college education shouldn't rely on workforce participation after age 60. This may mean having children take out college loans, and then helping children repay the loans, if one is able to continue working past 60.

Third, irrevocable trusts used by people who aren't yet retirement age should incorporate flexibility through powers of appointment, maximum latitude for decanting, or otherwise, in case circumstances of the settlor and/or his or her family change for the worse.

Spy Game ends with Muir driving away from Langley in a beautiful racing green vintage Porsche 911. My hope is that with realistic forecasts and thoughtful planning, you'll feel like master of your own game on your last day at the office.

Image above © Universal Pictures. Fair use rationale: critical discussion of their film Spy Game. For detailed rationale, see here.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.