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5 Reasons Why Retiring is Tougher Than It Used to Be

AdviceIQ | More Articles

August 15, 2014

Today’s retirement may look nothing like your parents’ or grandparents’. People live longer, benefits grow thinner, and health-care costs rise. Review your financial situation and start planning early so that this new retirement doesn’t catch you unprepared.

The new environment you retire in is a very mixed bag – there’s good news, bad news and unpredictable elements. You can live longer than ever, and stay active into your 70s, 80s and beyond. But to support a longer life, you may end up working long past 65, even if you are reluctant to. Your aging parents live longer and may need your help. Your adult children may need financial support, too.

All these challenges require more planning than ever. It’s never too early to begin thinking and planning for the new retirement. Times have changed:

1. You may work past 65. The average retirement age was 57 in the 1990s. Now it’s 62 and likely to continue to rise. It’s great to keep working if you love your job, but you may have to delay retirement or work part-time because of insufficient savings – even if you hate what you do and you can’t wait to retire.

2. You have a longer retirement to finance. A man reaching 65 today can expect to live until 84, and a woman 86, the Social Security Administration says. And those are just averages. You may have 30 years of retirement.

3. It may cost you more to be retired. My old 1990s financial planning textbook says your living expenses typically decrease 20 percent after you retire, but the new retirement carries a higher price tag – primarily from increased health-care costs. Ballooning medical expenses can quickly consume your savings.

4. You don’t plan for one person. Perhaps your parents are still alive when you retire. They may need a financial hand for medical and living expenses. Your children or grandchildren may still rely on your support, as young adults now take longer to reach financial independence.

5. Government benefits are spread thin. Social Security for higher income retirees may end up with a haircut. Medicare also may go this route, charging wealthier retirees more than poor retirees to avoid running out of funds.

Facing this new retirement, you need Social Security alternatives and an investment portfolio that funds expenses for 30 or more years. You need to rebalance and reconfigure that portfolio regularly to take on board falling or rising interest rates, inflation or deflation and higher or lower stock markets. The new retirement may also mean moving to a less expensive or more tax-advantaged state – or out of the U.S. altogether.

When I talk to my clients, one of their greatest fears is becoming a burden to their families. This is something smart planning can help avoid. It’s imprudent to retire without a clear understanding of your financial situation. Have a financial planner crunch out the numbers, and start preparing yourself for the new retirement.

Condo Hotel or Condotel – Is it a Worry-free Investment? 
Ryan Rillorta 

A condo hotel or “condotel” as it is widely known today is a relatively new concept in vacation home ownership. It is a condominium project that is operated as a commercial hotel even though the units are individually owned as in a condominium. It is managed like a normal hotel where there is a front desk that offers short term occupancy, food and beverage services, housekeeping and others. Unit owners are given Condominium Certificate of Title (CCT) which is the main difference between condotel and timeshare ownership of a vacation home. This can be a very good investment for those people who work abroad and occasionally come home for a month long vacation or less. Or for people wanting to have a vacation home that they can come home to on certain parts of the year and earn from it while they are away. Investing in condotel units can really be worry-free if you do the due diligence before signing the contract. A thorough analysis of the location, accessibility to the major needs of the target market, Return on investment and the track record of the operator with regards to management and accurate reporting of the investment performance on a monthly basis or as stated in the contract are the primary concerns that you need to be clear about before deciding to buy into one. I have enumerated the following advantages and disadvantages that I see about the condotel investment and I hope these would help shed light about it.

Advantages 
• Worry free on common leasing problems because the professional operator takes care of the marketing, room reservation, accounting, maintenance and concierge services.
• The elegant interior design of your unit is done professionally for you.
• You are assured in the share of income even if your unit has not been occupied in a month because the rental income for all units are pooled together and shared among unit owners based on a per square meter ownership. So owners of bigger units gets bigger share.
• If the condotel is located in a strategic place, like for example in Boracay Island which is a tourist haven. The rate of occupancy is high throughout the year, especially during peak season. This means big share for the unit owners and less time to recover your investment.
• This is one way of earning passive income since all hard work is done for you and all you need to do is to literally wait for the money to come.
• If ever you decided not to use your complimentary stay, you yourself can rent it out and pocket the full rent or have it waived and let the operator use your unit continuously.
• Return of investment can be achieved in less than 10 years depending on the rate of occupancy and location of the condotel project.
• No need to worry about association dues because it is part of the unit maintenance which the operator handles.

Disadvantages
• When you enroll your unit to the condotel operation, you are only allowed certain number of days in a year to occupy your unit and you have to notify the operator way ahead of time to book your stay. (Duration of complimentary usage may vary depending on the terms of agreement.)
• Requires additional investment for the furniture that the operator will install in your unit.
• Since the condotel is managed professionally, only a small percentage of the net income from leasing operation is shared among unit owners. Usually around 30% or less.
• Most condotel projects charges joining fees in order to enroll your unit in the condotel operations. This means additional investment on your part.
• Since the management is outsourced, it takes a great deal of trust on your part for the capacity of the operator to effectively manage the business.
• Some condotel operators prohibit usage of your complimentary stay on major holidays of the year or during the peak season.

Why expats are buying luxury condos in PH

MANILA, Philippines - Asian real estate investors and expatriates in the country are fueling the demand for luxury residential condominiums, according to CBRE Philippines. CBRE Philippines senior director for research and consultancy Jan Custodio said expats in the country are now buying condo units, instead of just renting. 

"We see a shift from expats from renting to buying units. They're availing of the 60-40 ruling on ownership of condo units... It's a win-win situation for the expatriates. They do their business here, they buy their units and by the time they have to leave, they sell their units and make a tidy profit as well," he said in a press briefing in Makati City on Tuesday.

While foreigners are not allowed to own land in the Philippines, they can own condominium units but subject to conditions of the Condominium Act.

Expatriates are keen on luxury condos, which are generally located within the business districts of Makati, Rockwell and Bonifacio Global City. If they rent the units, rents range from P230,000 to P250,000 a month. 

However, if they buy the unit, they stand to benefit since the value of these luxury developments have been soaring.

"Case in point are units in One Roxas and Pacific Plaza. In 2007, the units were selling for P35 million for a 300-square meter, 3-bedroom unit. Right now, we've had reports from our residential group that some units have been selling for as much as P50 million," Custodio said.
 
Asian real estate investors are also becoming keen on the Philippines, as Hong Kong and Singapore have implemented tax measures to make it difficult for investors and speculators to buy properties in the two cities.

"We're now seeing Singaporean, Hong Kong, mainland Chinese, Korean buyers coming in. It's the start of more overseas investment capital coming into the Philippines, especially on the residential side where you can buy condo units... We are seeing a lot more foreign investors coming in due to the tax and cooling measures in HK and Singapore. From overseas perspective, PH looks very cheap and cost-effective, from an investment standpoint, at a per square meter basis," CBRE chairman Rick Santos said. 

Some hotel developers are now taking advantage of this demand by launching luxury residential projects. Development of three luxury projects -- Shangri-la in Bonifacio Global City; Grand Hyatt Hotel and Discovery Privea in Makati -- are ongoing. 

"Now with the increased demand in the (luxury) segment, we see three ongoing projects, I guess that proves the point that the luxury segment is one of the segments to watch out for in the coming years," Custodio said.
 
BPO growth seen for next 10 years
 
At the same time, the Philippines' business process outsourcing industry (BPO) is seen to continue growing for at least the next 10 years. "The Philippines is where India was in 2002. We're looking at 10 to 12 years of record growth...India in 2002 was at the beginning of a 10-year growth cycle. And that's where we are now... But our macroeconomic fundamentals and leadership are stronger, more confidence here," Santos said. 

The Philippines remains one of the most cost-effective destinations for BPOs in the world. He noted that US expense pressures are leading to more BPO expansion in the country. 

"If you are a US, European company looking to reduce cost, outsource and improve earning - the Philippines is the place for call centers and Business process outsourcing," Santos said.
 
Demand from BPOs and multinational companies are seen to drive growth in the office property market. "The resilient office market is expected to continue its strong performance for the rest of the year, and increasing office space demand from multinational and BPO companies shall sustain growth in the sector," Santos said. 

CBRE said the Philippines remains one of the Asian countries with increasing rents and occupancy rates. As of the second quarter, the Philippines still has the lowest prime rent across Asia with Makati rates at $26 per square foot a year. Bangkok is second lowest with $32, followed by Bangalore with $36, New Delhi $41 and Kuala Lumpur with $46.

Vacancy rates, especially in Makati central business district and Bonifacio,have continued to drop this year as demand for office spaces picked up. As of end June, overall occupancy rating in the business districts of Metro Manila is at 97.49%.

Even after the crash, Americans still love real estate best 

By Jeff Macke April 18, 2014 12:00 PM

Breakout  

 

Five years after a real estate bubble popped in epic fashion, it seems Americans are looking to get back in the trade. According to a recent Gallup poll, 30% of us say real estate is the best long-term investment. Gold and stocks were ranked as the second most popular investments at 24%. 

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The results are a far cry from the peak popularity of housing back in 2002, but are still eye-popping in light of the magnitude of the housing collapse just 6 years ago. In the attached clip Yahoo’s Phil Pearlman says America’s passion for investing in whatever seems to be rising at the moment may have given us collective amnesia, but other forces are at work as well. 

“Part of this is confirmation bias,” explains Pearlman. Most people didn’t sell in 2007. Those who managed to hang on are still in tangible possession of a physical asset in the form of their house. Intuitively any asset that managed to survive the last decade of craziness in America can’t be all bad, can it? 

A Contrarian Indicator 

Over the years, America’s preferences as measured by Gallup have shown some wild swings. Back in 2002 in the wake of the dot.com bubble bursting, more than 80% of Americans regarded corporate corruption as at least “somewhat widespread” and fewer than 1 in 5 thought equities were a good long-term investment. 

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As fate would have it stocks were just weeks from bottoming when the 2002 poll was taken. Those who bought a basket of U.S. stocks the day the Gallup data was released made nearly 20% over the next 12 months. Suffice it to say there’s some statistical support for the idea that buying whatever asset is the most unpopular at any given moment is a good strategy. 

With home prices on the rise it makes some sense to see housing regaining some appeal as an asset. What’s harder to understand is the stubborn appeal of gold. The price of gold has dropped more than $600 an ounce, equal to almost ⅓ of its value in the last two and half years. 

A deeper dive into the numbers offers a disturbing explanation. As it turns out gold is overwhelmingly favored in households earning less than $30,000 per year. With the volatility of gold prices and its inherent lack of utility, the notion of gold being an optimal investment is a triumph of marketing over economic fact. 

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In other words, those who can least afford to be investing in precious metals are the most likely to be putting their money in gold. 

What’s this all mean for the future of housing? It suggests prices are a long way from the lows, but there’s little to support the idea of bubble-levels of enthusiasm for either housing or stocks. 

For better or worse the safest bet is that we’re somewhere in the middle of a rise in housing prices, and Americans have learned nothing from the boom-bust cycles of the last 10 years. The question isn’t whether real estate is the best investment they can make. The question is whether real estate is an “investment” at all.

The Retirement Reality Gap
The new post-Great Recession economy has taken its toll on retirees, as well as those of us looking forward to retirement in the near future. Unfortunately, there's something of a reality gap between what today's workers think about retirement and what actually happens in retirement. Here's a look at the perceptions and the realities.

Today, many people plan to delay retirement. According to a 2013 survey by the Employee Benefit Research Institute of 1,000 individuals age 25 and older, some 22 percent of workers said the age at which they expect to retire has increased. Respondents cited a poor economy and the inability to afford retirement as their main reasons for the delay. Almost 10 percent of workers said they'll never retire. At the same time, the number of people expecting to retire early, before age 65, is just about half of what it was 20 years ago.

The gap: People retire sooner than they expect. Almost half of retirees surveyed reported that they retired sooner than they had planned. Those who retired early cited a number of reasons. A few retired because they could afford it. But many more cited a layoff, health issue or disability.

Baby boomers feel younger than they really are. According to a 2012 AARP-sponsored poll of 1,852 registered voters, including 1,331 age 50 and older, health and longevity are not topics that often come up in conversation among baby boomers. Only about half of those nearing retirement said they had discussed the issues of poor health, disability and death with their spouse or doctor. And according to a 2009 Pew Research Center survey of nearly 3,000 adults, boomers felt at least 10 years younger than their actual age. They peg "old age" at somewhere above 75.

The gap: The biggest reason for early retirement is an unexpected health issue. According to the EBRI survey, 55 percent of those who retired earlier than planned say they did so because of a health problem. An unforeseen illness can disrupt your retirement dreams and cause other complications. For example, if you think you'll work until age 75, you might not consider things like long-term health insurance. According to the U.S. Department of Health and Human Services, someone turning 65 today has almost a 70 percent chance of needing long-term care services.

Today's workers plan to work part time in retirement. Almost three quarters of people now holding a job said they expect to work after they retire to supplement their income, according to the EBRI survey. Over half admitted that they are counting on income from a part-time job to be a significant source of income in their later years.

The gap: Only about 25 percent of retirees report that they are actually working in retirement. The reality is that many retirees want to keep working part time for their old employer, but their old employer doesn't need their services. Or they want to find a consulting job, but discover that their experience is not relevant in the current marketplace. Many find that the majority of help-wanted opportunities are minimum-wage jobs in retail or hospitality, and they decide not to work after all. If you do want to work part time in retirement, the best time to find the job is before you retire.

Workers are aware that they are left largely to their own devices to save for retirement. Multiple surveys have shown that workers have lost faith in Social Security, know that defined-benefit retirement plans are on the wane and that they should take advantage of various retirement accounts such as 401(k) plans and individual retirement accounts. Major financial firms including Fidelity and Aon/Hewitt recommend saving up to 10 times your annual income, which along with Social Security should allow you to replace approximately 85 percent of your preretirement income.

The gap: People fall far short of their savings targets. According to a 2013 study by the National Institute on Retirement Security, 45 percent of working-age households do not own any retirement account assets. And two-thirds of older households ages 55 to 64 have retirement savings of less than one time their annual income, which is far below what they need to maintain their standard of living. A little over a third of retirees say a pension provides a significant amount of their income. Still, some 70 percent of Americans credit Social Security for their main source of income, according to the EBRI survey.

The solution. There is often a major difference between what people expect in retirement and what they actually get. As you go about planning your own retirement, pay attention to the gap -- the one that can be caused by a layoff, unexpected health issue or unfamiliar job market. And make plans to close that gap.

Tom Sightings is a former publishing executive who was eased into early retirement in his mid-50s. He lives in the New York area and blogs at Sightings at 60, where he covers health, finance, retirement and other concerns of baby boomers who realize that somehow they have grown up.

The World’s 9 Most Affordable Places to Retire

These cities boast a low cost of living, a foreigner-friendly vibe and plenty of retirement amenities.

By Kathleen Peddicord April 16, 2014

One of the greatest advantages of retiring overseas can be a dramatically reduced cost of living. Indeed, if your retirement budget is modest, your best options for enjoying a rich, full, comfortable retirement are not, I would argue, to be found in the U.S. … but elsewhere.
If your nest egg is small, but you don’t want to give up on the retirement lifestyle you’ve spent your entire working life dreaming about (who does?), here are nine places worth a close look.

Asia

Nha Trang, Vietnam
Monthly budget: $650
All things considered, Nha Trang, Vietnam, has one of the lowest costs of living of any city in Southeast Asia or the world.
The city has been actively welcoming westerners to its shores since the 1920s and has a foreigner-friendly vibe that helps even nervous new expats feel comfortable. Life here can be as adventurous or as laid-back as you like. The beach, the ocean and the bay all offer water diversion, and the mountains and rural landscapes invite exploration.
English is widely spoken and understood, and the locals are gracious, industrious, curious and friendly. The food is delicious and varied, and the weather is comfortable year-round without extreme variations.
Local doctors can treat uncomplicated ailments at a cost of about $10 a visit. There’s also a modern hospital here, opened in 2010, that receives strong reviews from expats and is similarly affordable. Dental care is good and affordable by any standard. A cleaning or filling runs about $5.

Chiang Rai, Thailand
Monthly budget: $750
With a population of fewer than 100,000, Chiang Rai offers an intimacy that cannot be found in a large city. Although there are internationally accredited hospitals here, as well as some large shopping complexes just outside the city center, a small-town ambience prevails.
Chiang Rai is in a natural setting. Thick, cool forests, majestic waterfalls, elephant camps, hot springs and some of the most diverse hill-tribe villages in the world are located just a short distance outside the city.
Most expats move to Chiang Rai after living in Chiang Mai. Here they tout the cleaner air, lighter traffic, friendlier population and lower cost of living. And unlike better-known Chiang Mai, Chiang Rai is not overrun by tourists and expats.  
Chiang Rai has largely escaped the breakneck pace of “development at any cost” prevalent in much of Southeast Asia. Rental prices are extremely low, and you get a lot of house for your money.

Ipoh, Malaysia
Monthly budget: $897
Ipoh is an increasingly popular retirement haven among Malaysians, who claim its fresh air, clean water and relaxing lifestyle not only improve the quality of life but also promote longevity. Foreign retirees are beginning to take note.
Despite having a population of more than half a million, Ipoh feels like a small town. You can expect first-world health care and a modern infrastructure but no overcrowded city center packed with skyscrapers and high-rises. Friendly locals speak English, making it easy to assimilate, and lenient immigration policies make Malaysia an easy country to live in full or part time.

Dumaguete, Philippines
Monthly budget: $1,000
In addition to its welcoming, friendly, English-speaking people, Dumaguete boasts a warm, tropical climate and lots of opportunity for outdoor adventures, including world-class diving and snorkeling and whale and dolphin watching.
Dumaguete sits right along the ocean, with attractive beaches to the north and south of town. This is also a university city, meaning an abundance of inexpensive restaurants that cater to “starving” college students. Foreigners have the opportunity to make friends with educated professors and aspiring students, take classes and enjoy cultural opportunities not typically found elsewhere in the Philippines, including theater, ballet, art shows and libraries.
Medical and dental care is good, with a new hospital under construction and international-standard health care available in nearby Cebu.

The Americas

Cayo, Belize
Monthly budget: $1,100
Despite the growing numbers of expats here, the real estate market in Cayo, for sales and especially rentals, is still priced for Belizeans, which helps keep the cost of living very low.
Belize is a retirement, tax and offshore haven. A place of stunning landscapes and abundant natural resources, this is a sunny country where the folks speak English and value their freedom and privacy. On the other hand, this is a small country where the infrastructure is most kindly described as “developing.” 

Loja, Ecuador
Monthly budget: $1,100
Ecuador has acquired a reputation as one of the best options in the world for retirees on a budget, but little Loja is still off the world’s radar. In Loja, you’ll experience life in the real Ecuador, off the beaten path.
The climate here is pleasant, the health care great and the people friendly. Expats who settle in Loja say they enjoy becoming a part of the local community.
If you want to live among other expats or you’re not interested in learning another language, Loja isn’t for you. However, if you’re up for an adventure, this charming town has a great deal to offer.

Granada, Nicaragua
Monthly budget: $1,300
With two long coastlines, two big lakes, volcanoes, highlands, rain forests and rivers, geographically, Nicaragua has it all. And it’s all less discovered and more affordable than Nicaragua’s better-known neighbor to the south, Costa Rica.
Granada is the center of foreign retiree interest in this country and home to an established expat retiree community, making it an easy place to settle in. The capital, Managua, is less than 45 minutes away with its international-class Hospital Metropolitano Vivian Pellas, opened in May 2004 and said to be the best private hospital in Central America.

Europe

Tralee, Ireland
Monthly budget: $1,500
Other cities and towns in Ireland, Dublin in particular, continue to move in a more European direction. You see the same brands, franchises and shop fronts as in any European city, with little of the town’s own heritage and character shining through.
In Tralee, the majority of people you find working in shops, restaurants, bars and tourist sites are locals. As a result, this town offers a more authentic Emerald Isle experience. And thanks to the recession of recent years, the cost of living and of real estate is temptingly low.

Carcassonne, France
Monthly budget: $1,750
In general, France is not a place to choose if you are hoping to make a massive cut to your cost of living. That said, this area, the “other South of France,” is far more affordable than its flashier counterpart while offering the best of French country living.