AUGUST 4, 2018



Are We Ready for Retirement?


By Belinda A. Aquino, Ph.D.

Are we ready for retirement? This is extremely difficult to answer with any degree of certainty. What we do know is that it’s inevitable as the final phase of one’s working career or calling. For many of us, retirement isn’t a pressing issue. We choose instead to look at it as a distant reality. But time passes by almost imperceptibly, then all of a sudden, we are in our late 50s to early 70s, and the time of reckoning has come. What do we do?

The Retiring Baby Boomers

This period in the 21st century now entering its second decade is marked by a transition in the country’s active workforce.

The generation that is more popularly known as the "Babyboomers” -- those born between the years 1946 to 1964 -- have mostly retired or are planning to retire after having devoted anywhere from 40 to even 50 years in the active workforce.

In their retirement years, many baby boomers still have part-time employment to augment the pension that they receive from their former employers, which may not be enough to support a family that can include extended members like in-laws, grandchildren and other additions to the original nuclear family. The financial hardship is often exacerbated by the constant rise in the price of health care, children’s education, baby-sitters for young members of the family, and other daily life expenses.

Even beyond 70, many seniors work until their 80s or more. Some institutions and companies do not have a mandatory retirement age. The University of Hawaii is an example.

Some faculty at the University challenged the mandatory rule and brought it to the courts as a “class action” suit citing that it was unconstitutional. The state Supreme Court ruled in their favor, so the faculty, for instance, can remain employed until they decide to finally retire.

How much does it cost to retire in Hawaii?

For most people who love Hawaii’s weather, culture and people, it’s ideal to stay on the islands for retirement. But the cost to retire in paradise isn’t cheap. There’s no one-size-fits-all dollar figure for retirement because each individual’s needs and comfort-levels vary.

But GOBankingRates came up with an estimate annual income of $56,404 to live comfortably in retirement in Hawaii. That is about $4,700 a month. To live comfortably in Hawaii for 20 years of retirement, it would take about $1.13 million.

GOBankingRates looked at the average of spending on groceries, healthcare, gas and fuel, housing and utilities, and lastly personal consumption expenditures not included in the four categories.

Another rule of thumb is that a person planning to retire should have at least six years of annual income saved. This savings would augment other retirement income such as Social Security.

Experts say if retirement expenses exceed Social Security and pension income by $20,000 a year, you’ll need a nest egg of $300,000 to $400,000 in pre-retirement savings.

A sizeable portion of retirement spending is on healthcare. The average couple retiring at 65 years old can expect to pay $280,000 in healthcare expenses throughout their retirement, according to Fidelity Investments. This is a 2018 estimate on fairly healthy couples. Long-term care and hospitalizations could inflate that number.

The Economic Policy Institute reports that families with a head of household between ages 56 and 61 have mean retirement savings of $163,000.

Many families in Hawaii do not have that kind of savings. So for some, retirement is not even seen as a viable option.

A 2016 study by the Associated Press-NORC Center for Public Affairs Research found that 25 percent of workers 50 and older say they do not plan on retiring. Among low wage workers, earning less than $50,000 a year, it was 33 percent.

Working in late age is so common in Hawaii that workers 50 and older earned $20.5 billion in 2015 and paid 50 percent of the state and local taxes ($4.2 billion), according to AARP. The total economic impact of seniors was $33.5 billion.

Barbara Kim Stanton, AARP Hawaii state director, told the Honolulu Star-Advertiser, “Hawaii always had one of the longest-working populations because we are such a high-cost-of-living state. It is just the realities of the economics in Hawaii.”

Hawaii’s culture of ohana, multiple-dwelling living can help to offset housing and food costs (both among the highest in the nation), but not for other large expenses like healthcare.

Experts say planning and contributing to a retirement budget is necessary, the earlier the better.

Gemma Constantino, Salt Lake, an office manager, says she puts money aside for retirement. “But, I have a lot of catching up to do. I wish I had started early. It’s the last thing you think of when you start raising a family. The high cost of living (in Hawaii) also makes it difficult.

“My husband will have union retirement benefits plus social security benefits, that will be a big help,” said Constantino.

Gemma’s husband is among the lucky ones. Many private companies today can’t afford any retirement benefits plan. Only a few companies and government can afford to extend retirement benefits to their employees. As inflation rises, even government will be hard pressed to find this affordable.

Serafin Colmenares, Jr., Aiea, state employee, said he is also preparing for retirement. “We have put aside some savings and we also have some investments.”

Marissa Mull, a clerk who lives in Mililani, makes lifestyle choices that she believes will better prepare her for retirement. “The main thing we can do is eliminate our debt and stay away from it. If we don’t have cash, we don’t buy it. In addition to staying out of debt we have a savings plan.

“It’s very important to put money aside for retirement and to diversify our investments. We try to maximize our 401K and IRA as much as possible,” said Mull.

“We are working on it (retirement preparation) because if we don’t, how are we going to support ourselves?” she added.

With company pension increasingly rare, it’s becoming clear that workers must begin taking it upon themselves to put retirement money aside.

How are retirees doing?

Survey data and informed observations of how retirees are faring show that the first five years is not the “best of times.” In fact, this stage of retirement is often referred to as the “fragile decade” for a number of reasons.

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