What an eventful couple of weeks since our last blog. Working concentrically, last Friday York held its second “Give Local” charitable giving marathon and it was a smashing success. The event is a 24-hour window for Yorkies to make charitable gifts to not-for-profit organizations.
The format is like “crowdfunding” in which viral charitable donations are promoted via local and social media. The goal is to transact a high volume of gifts from a large cross section of donors to their favorite causes– and it worked swimmingly.
The event leaders set a bodacious fund-raising goal of $3.0 million - three times larger than the 2018 goal – and they exceeded it!
The entire day downtown was festive, like a big outdoor party. Carrie and I lent a hand to our favorite cause, the York County History Center and it was satisfying to see so much energy and community spirit in our rebounding city while financially helping so many important causes.
While the Give Local York event ended our week with a flourish, it also started with a bang attending a wealth advisor conference in Nashville.
The best thing I learned at the conference is that I really like Nashville. We had not visited Music City before and just marveled at the league of musical talent performing all around the electric five-block neighborhood known as Music Row.
To each his own, but I’d go back to Nashville over Las Vegas hands down to listen to more outstanding live music performed by remarkably talented, undiscovered musicians while relaxing on a rooftop honky-tonk bar.
The hat trick is the China trade conflict, which flared into an open crisis this week. One of the catalysts for the impressive stock market rally thus far in 2019 has been the optimism about a looming US-China trade deal.
I had nearly forgotten about this unresolved matter until the Tweet storm this week sent the stock market gyrating.
The economic impact from trade tariffs is really complicated and often damaging to all countries involved. Until 1913, the year in which the US income tax law was adopted, the US government relied almost solely on tariff revenues and they have been a tool used by populistic politicians since forever.
The fact is that for every US industry advantaged by a tariff, others are damaged, some severely. The government should not be picking winners and losers in the US economy via tariff policy and the stock market will soon lose its patience with the trade brinkmanship on both sides.
The time for posturing is over. With the Chinese brass in town, hammer out a mutually disagreeable trade deal already - even if it’s imperfect - and end this mutual tariff talk nonsense.
I recently read an interesting financial planning research paper on the substantial financial advantages of working longer and retiring later. The Stanford University study quantified the powerful financial impact on the quality of retirement for many Baby Boomers by pushing back their target retirement age goal.
The study did the math as to how futile it is for Baby Boomers to play catch up solely through higher retirement savings and made the economic case for Boomers to work longer instead.
A key (and interesting) study finding is that for middle aged workers, increasing their retirement saving rate by one percentage point each year for the ten years leading up to retirement has the same impact on their retirement standard of living as working just a single month longer.
It also found that workers who reach age 62 can increase their retirement spending power by one-third by working just four year longer. Now that’s moving the retirement spending needle.
My experience is that most Boomers can’t or won’t boost their retirement savings to a sacrificial level to shore up a deficient retirement capital pool. Working longer is the best antidote for deficient retirement resources, but many don’t want to take that medicine either.
The retirement savings math does work much differently for younger workers because the power of long-term compounding can turn even small amounts of retirement capital saved early (and invested well) into material spending capital in retirement decades later.
The study also quantified the major financial advantage from delaying the start of Social Security benefits. This move is a cornerstone of our retirement planning model. Delayed Social Security credits add an eight percent permanent benefit boost to your Social Security benefits each year from full retirement age until age 70.
If you plan on living past a normal life expectancy, delaying Social Security is an essential way to boost your retirement sources to help fund a long retirement, maybe even for your spouse in the form of higher survivor benefits.
Furthermore, a nuance of the Social Security program is that working during your traditional retirement years can increase your retirement benefits. Should your work income rank in your top thirty-five highest indexed earnings years, the SSA will automatically recalculate your benefit higher, even if you are already receiving benefits.
Many of the financial retirement benefits derived from working later are rather obvious, but that doesn’t make them less compelling:
- More earnings;
- Reduced timeline to spend fixed retirement resources;
- Longer saving stream and compounding benefits;
- Shortens the life expectancy gap;
- Attaining Medicare eligibility age;
- Higher Social Security benefits.
Working longer can be easier planned than accomplished.Health issues, corporate downsizing, age discrimination, caretaking for spouses / parents are just some of life events that could impair your future work longevity.
For Boomers with whom we work possessing less-than-desired retirement resources, we use a balanced approach to help right their course.It may include more savings, more aggressive investing, delayed Social Security benefits, home downsizing and, oftentimes, part-time work income, especially during the early retirement years and a combination thereof.
Think about the financial advantages of working beyond your ideal retirement age as a compromise between immediate and delayed gratification if your personal retirement spending math is not computing.
Until next time, be well…Tim