Affording retirement

Retirement is a rite of passage many Americans eagerly look forward to as a reward for hard work. But for thousands of baby boomers it may never happen.

According to the Associated Press, starting this month, more than 10,000 baby boomers a day will turn 65, a pattern that will continue for the next 19 years. As a result of the recession, a dismal housing market and doing a lousy job of saving, many boomers are facing financial difficulties.

"The situation is extremely serious because baby boomers have not saved very effectively for retirement and are still retiring too early," said Olivia Mitchell, director of the Boettner Center for Pensions and Retirement Research at the University of Pennsylvania.

Disturbing numbers

The traditional pension plan is disappearing. In 1980, the Associated Press reported, some 39 percent of private-sector workers had a pension that guaranteed a steady payout during retirement. That number stands closer to 15 percent today, according to the Employee Benefit Research Institute in Washington, D.C.

Many retirees banked on their homes as their retirement fund. But the decline in housing prices has slashed almost a third of a typical home's value. Now 22 percent of homeowners, or nearly 11 million people, owe more on their mortgage than their home is worth.

Nearly two in three people age 55 to 64 had a mortgage in 2007, with a median debt of $85,000.

Nearly 3 out of 4 people file to claim Social Security benefits as soon as they're eligible at age 62. They are locked in at a much lower amount than they would get if they waited.

The monthly checks are about 25 percent less if a person retires at 62 instead of full retirement age, which is 66 for those born from 1943 to 1954. Those who wait until 70, their check can be 75 to 80 percent more than at 62.

Retiring early

Highlands County is a retirement haven. Some of those who have retired here did so early.

They say being frugal, paying off credit cards and identifying where money is being spent are important things to do.

It also helps to have multiple sources of income.

Greg and Kristie Plank, who are from Ashland, Ohio, live in Tanglewood in Sebring. Greg retired at 59 after working as the controller for a small construction company. Kristie retired on the day she turned 60 after 20 years as a teacher.

Greg served in the Navy for four years and joined the Navy Reserves.

In planning how to support themselves in retirement, Greg said there are four things they could tap into. They are the Navy pension and Social Security, his IRA and her teacher's pension.

Greg, who is now 63, said a lot depends on a person's lifestyle in terms of how someone is able to retire. He noted they live in a little house and don't have credit card debt.

"We were able to do this because we lived simply and we always have," Kristie said. "We have always been careful.

"When we were young, we did the stupid things with the credit cards," she added. "It was not big stuff. We didn't go out and buy boats and things like that. But it was more than what we needed."

"We learned," Greg said.

She said they decided a long time ago - "for one thing if we wanted to eat" - that we needed to have money.

"If you wanted to retire early, you don't have debt when you do it," Greg said.

Kristie, who is now 64, said she learned when she came to Florida to be active and do things.

"All I had ever seen were people who once they turned a certain age they seemed to sit in their chair and knit ... and didn't do anything," she said.

"We're busier now than we were when we worked," Greg said.

"In fact, we thought about going back to work just so we would have more time," he joked.

Bill Nichols, the former emergency management director for Highlands County, has retired twice. Nichols spent 26 years with the city of Miami Fire Rescue. He left Miami on April 29, 2001 and began working with Highlands County on April 30, 2001.

Nichols worked for Highlands for nine years. He retired in April of last year at the age of 59.

He has a private pension from Miami and a pension from Highlands.

Nichols credits his wife of 33 years, Jean, for being able to save money.

"We have lived on less than what we made," Bill said.

Jean said she is frugal by nature and noted that name brands don't mean anything to her.

Bill is a serious planner and likes to set goals.

Jean recalled they had returned from their honeymoon and were living in Miami. They were sitting around a table when Bill asked her "what are your goals?"

"I don't know," Jean said she replied.

She asked him what he was thinking about, and he talked about when he planned to retire and when the house would be paid off.

"If you set goals, you will strive to attain them," he said.

The one goal Nichols said he didn't attain - to retire at 45.

Linda Bailes of Sebring took early retirement when she was 56. A native of West Virginia, Bailes worked for a large bank in the Charleston area.

Linda and her husband, Bob, moved to Sebring in 1998. She went back to work in 2000 for the city of Sebring. She started with administrative support in accounting and then joined the accounting department.

She worked for the city for 6 1/2 years and became vested. She has the pension from the bank as well as Social Security. Bob has a small pension from a trucking company he worked for.

"We never tried to live beyond our means," she said.

Linda and Bob each have one credit card that she said is used for emergencies.

Linda's advice is to think twice before buying and ask "Is this something you need or just want?"

She doesn't regret taking the early retirement because she loves living in Florida.

"We're doing fine," she said.

Consume less

John Clark, branch manager of Waypoints Financial in Sebring, said he is not shocked by the situation facing baby boomers. The financial planning industry has known this was coming for years.

Clark said those who expect to rely only on Social Security to support themselves face "a scary existence." He noted they have a false expectation about retirement and might not be able to retire.

Clark said people shouldn't depend on Social Security, describing it as a public pool of money that is at risk.

He suggests people in that situation consume less, create a budget and stick to it. Clark also advises to not carry balances on high interest credit cards.

"You have to live below your means," he said.

In terms of spending, Clark said people should ask themselves: "Do I need this?" He said the question should be asked for almost anything - including food choices.

"It's hard; it's a discipline," he said.

Clark explained that Americans are trained to be consumers, and we're influenced by the media to buy things.

For younger people who don't have to think about retirement for quite some time, begin to save now. Take advantage of your employer's 401(k) if possible and take the maximum match that is offered.

"It is free money," Clark said.

He also suggests to set up a rainy day fund and a Roth IRA.