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Cypen & Cypen
DECEMBER 2, 2004

Stephen H. Cypen, Esq., Editor

Never Forget - September 11, 2001


Introduced on June 1, 2004 by Senator Specter, the Veterans’ Benefits Improvements Act of 2004 was cleared for the White House on November 17, 2004. One part, which was added by amendment, requires employers to provide returning military personnel notice of their rights under the Uniform Services Employment and Reemployment Rights Act. Notice can be posted in the place employers usually provide employees with other information. S.2486 is officially titled “An act to amend title 38, United States Code, to improve and enhance housing, education, and other benefits under the laws administered by the Secretary of Veterans Affairs, and for other purposes.”


Employee Benefit News has released the first of a two-part series on the changing face of retirement. Entitled “What is Retirement?”, its content is provided by Educated Investor. Retirement means different things to different people. The nature of retirement has changed over time. In fact, the concept of retirement is a relatively modern invention. Prior to the 20th century, it was practically unheard of for a person to retire. Unless they were unusually wealthy, people typically worked until they were unable, at which point their children cared for them until they died -- a few years later. After the industrial revolution, when society became less agrarian, the retirement plan was born: typically a fund established by employers to provide a defined income benefit to workers who could no longer work. Then, the average retiree lived only 10 years. The defined benefit plan would be the dominant source of retirement funding for about 80 years. By the mid-1900s, average retirement age dropped to 67. (Today’s average is 62, with an average life expectancy of another 20 years.) In the first half of the 20th century, workers tended to stay with the same employer for 30 years or more, relying heavily upon their employer-guaranteed pensions for retirement. Today, the average worker will change jobs 9 times by age 38! And the initial dependence on employer-funded defined benefit plans has diminished, giving way to reliance on defined contribution and 401(k) plans funded by flexible employer and employee contributions. This switch is fundamental, since under a defined benefit plan the employer guarantees a retirement benefit and bears the investment risk of the plan’s assets; in a defined contribution plan, there is no employer-guarantee of benefits and the participant bears the entire investment risk. Now that a significant portion of the burden of funding retirement has shifted to the employee, personal financial planning for retirement has become more important. So, what to do? Planners describe three stages of retirement. In the early stage, retirement may be nothing more than a career change: after spending many years with several employers, an employee may feel he is ready to do something else, perhaps a different job working on his own terms, maybe consulting in the same field or possibly starting a new business or lucrative hobby. By the middle stage of retirement, leisure activities replace work activities. In the final stage of retirement, one quits work or cuts back on leisure activities entirely, willingly or unwillingly -- at some point, requiring assisted living care or nursing home services. In starting to plan for retirement, it is important to identify the activities one will engage in during the three stages of retirement, their duration and cost. First, plan your retirement budget. If you were to retire tomorrow, how much monthly income would you need to achieve your retirement goals? Now, where will the money come from? Financial planners tell clients that retirement income is like a three-legged stool: income from your employer retirement plans, income from Social Security and income from accumulated personal savings or IRAs. If any one source is missing or short, the stool will be shaky at best. Inasmuch as the Social Security Administration is required to send you an earnings statement each year that will list your estimated benefit, determining that leg is relatively easy. And you can probably accurately estimate how much you will get from your employer-sponsored plans, by referring to your periodic account statements or just by asking your former employer. But how much you will get from your own assets depends upon how much you save and how you save it, which is the subject of part two, which we will report here when available.

Copyright, 1996-2004, all rights reserved.

Items in this Newsletter may be excerpts or summaries of original or secondary source material, and may have been reorganized for clarity and brevity. This Newsletter is general in nature and is not intended to provide specific legal or other advice.

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