A Financial Profile For Retirement

By Richard Bambrick
Richard.Bambrick@gmail.com

James F. is a 60-year-old father of four, living in Kings Park, NY. His property abuts Sunken Meadow Park on Long Island's north shore, and he enjoys a short stroll to the boardwalk and the ocean. Mr. F., who asked not to be fully identified in return for an open look into his personal finances, has been in insurance administration for more than 35 years, although there have been some significant bumps along the way.

His first 22 years in the business were spent with a large, insurance company based in the midwest, where he rose to a senior management position in the firm’s Long Island offices. When the company decided to consolidate all senior management to the home office, Mr. F was offered the opportunity to relocate, but his Long Island roots were deep, and he opted to leave the company. He tried to establish his own agency, but he said the timing was awful. “I specialized in personal lines, which got hurt in the early 1990s,” Mr. F said, explaining that several hurricanes and other natural disasters took a toll on the business in general.

Each year of independence meant going deeper and deeper into his savings to make ends meet, and in 1998 he threw in the towel and took a mid-level position at a major property/casualty insurance company for far less than he had been earning in the past.

“Dollar for dollar, I’m making about the same now as I was then (1992),” he said, adding that he is way behind where he once thought he would be on the path to retirement security.

It is his current income of about $60,000 that has him cautious in considering retirement. Nonetheless, a simple online retirement planning calculator reveals his prospects are not as dreary as he thinks.

Mr. F’s wife, who is 14 years younger than him, returned to school, and four years ago took a job as an operating room nurse at a state hospital. The couple has switched from the healthcare plan offered by Mr. F’s firm to a New York State plan, which is available to hospital employees and is far more comprehensive.

The retirement planning calculator requires basic financial information, and an annual retirement income target, which the F’s set at 70 percent of their joint income. The data they entered includes:

Current Income Husband. . .$60,000 Wife . . . . . . . . . . $40,000 Projected Social Security Yearly Income Husband . . .$19,823 at age 65 Wife . . . . . . .$11,605 at age 62 Individual Retirement Accounts Husband $35,500 with annual $2,000 Contribution Wife $15,500 with annual $2,000 Contribution Savings/Stocks $496,000 at current market value

The online calculator computes the salaries at a fixed growth rate, and estimates Social Security benefits based on the salaries. It estimates the couple will need a real income of $65,316, which in 2011, when Mr. F reaches age 65, would be inflation adjusted to $75,719. If they maintain their savings nest egg at $491,366 through 2011, their chance or realizing that retirement income is 99 percent, according to the retirement planning calculator. Moreover, the calculator does not take into account a pension Mr. F will receive from his original company, along with a New York State pension Mrs. F will receive if she works another 16 years. Along with that, the house they purchased in Kings Park for $185,000 in the mid-1980s is now worth about $500,000, although annual taxes are over $8,000.

Nonetheless, Mr. F states “I’m not looking to retire.” He points with admiration to a woman working in his office who is 82 years old. If he does retire, he would like to stay on Long Island, despite the fact his money would go further elsewhere.

The couple’s three daughters, from Mr. F’s previous marriage, have all left Long Island because they can not afford to live here. Two are living in Syracuse, NY, where they believe they will be able to purchase homes with their husbands in the not to distant future. The oldest, who is expecting the family’s first grandchild in the spring, is a teacher in the Washington, DC area, but after the baby is born, she and her husband plan to move to Syracuse, as well. Mr. and Mrs. F have one son who is still living at home, attending Suffolk Community College.

Logic dictates that a move upstate to be near the girls and the grandchild would make sense, particularly if Mrs. F could find a position in another state hospital to maintain insurance and her pension. Mr. F is not considering it, at this time. “I would consider moving off Long Island only under duress,” he said. “I like living here. It’s still a bit rural where I am. I like walking out of my house in the morning and seeing the trees and hearing the birds. I can walk down to the boardwalk.”

His Long Island roots are still too deep to pull up.