Enhancing Retirement Success Rates in the United States
As college students, we have barely started our careers, let alone started thinking about them ending and our retirement. But, should we start thinking about it now at such a young age? Well, I think we should educate ourselves and start thinking about it. If we spend 40 years working and then another 30 potentially up to 50 years of living without any new income, we must have funds to live off that will last us a long time.
In an ideal world, we accumulate from our 20’s to 60’s, retire, and then decumulate from our 60’s to say our 90’s or longer. However, this is not necessarily realistic, said speaker Dr. Chia-Li Chien in her webinar Enhancing Retirement Success Rates in the United States. Life happens outside of our control. There may be a period we get laid off, need to support our family, pay for college fees, have health problems, or just spend too much.
All of these extras lead to the “worry that assets won’t last long enough,” said Dr. Chien. The worry of outliving our assets affects many individuals. There are also other aspects outside of our control, such as market return and inflation.
With generations now living longer and longer thanks to ever-improving technology and science, today’s students may live even longer than their grandparents lived. A little over ten years ago, mobile phones were only useful to call one another and send text messages. Now we listen to music, navigate ourselves around the world, take photos, and so much more. If this type of technology can develop so quickly in a decade, imagine where our understanding of science, technology, and health will be in another decade. Therefore having a sufficient amount to support ourselves in a long and comfortable retirement is extremely important.
The three research models Dr. Chien looks at are:
1) determining the success rates of the base retirees population considering only partial retirement assets.
2) adding the retirement strategy of home equity conversion mortgages if household or individual qualified, and
3) delayed increasing annual income through Social Security benefit claiming and continuing work after retirement or continuous working during retirement.
In her research, Dr. Chien created a method to see what success looks like in retirement. The results also showed that having a higher net worth leads to higher success, allowing clients to spend above the state average. These state averages vary around the United States; some are significantly higher than others. For example, California is below compared to US national weighted average. Dr. Chien also spoke about the importance of having a plan and knowing what will happen when one spouse dies. How do you protect the surviving spouse?
Dr. Chien’s advice at the end of her lecture is to:
- Diversify or leverage all assets
- Plan early and plan for surviving spouse
- Control spending
- Be nice to your family as you may end up living with them in the future!
Although it can be hard to think about retiring as it is so far away for many students, thinking about the future now can make a huge difference later. What is more, it is never too early to save and start putting it into practice.
To learn more about MBA or MS in Financial Planning at California Lutheran University visit our website.
About the Speaker:
Dr. Chia-Li Chien is a succession program director at Value Growth Institute, a succession consulting practice dedicated to helping business owners increase the equity value of their firms. Before her private consulting practice, she held several senior management positions in Fortune 500 companies. Dr. Chien is a director of the financial planning program in the School of Management at California Lutheran University. Dr. Chien is a frequent speaker about succession and retirement planning at national conferences and has published three books, including her most recent publication, “Enhancing Retirement Success Rates in the United States.” Dr. Chien serves on the boards of various national financial service associations. She holds a doctorate in financial planning and is a Certified Financial Planner (CFP®) as well as Project Management Professional (PMP®).
About the Author:
Rosie Baker is an undergraduate student at California Lutheran University expecting to graduate in May 2021. She is studying Communication with an emphasis in PR and Advertising and has a minor in Creative Writing.
References:
Chien, C. (2019). Enhancing retirement success rates in the united states: Leveraging reverse mortgages, delaying social security, and exploring continuous work. Switzerland, Cham: Springer International Publishing. doi:10.1007/978-3-030-33620-2
Enhancing retirement success rates in the united states
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