from VCCA Journal, Volume 9, Number 2, Summer 1995, 54-56
© Copyright 1995 VCCA Journal
(The following is an excerpt from a presentation
given at the Virginia Community College Association
Convention on October 6, 1994.)
Retirement is a part of life that should hold golden moments unique to this age group. This is the season of life in which pastimes and hobbies may be fully enjoyed now that the rigors of making a living and raising a family are gone.
In reality 80 percent of Americans retire poor and do not have the resources to engage in activities which would make their retirement an enjoyable and satisfactory chapter in their lives. The life's savings of an average fifty year old is $2,300 which is usually less than the average person spends on food for a year. The average American works more today than in 1973 and has 32 percent less free time. Forty-eight percent of male executives see themselves without adequate resources during their retirement years.
Thirty-six million social security checks are sent out each month. In a given year three hundred thousand people retire to an income that in most cases barely meets their immediate needs. Since many people will spend as many years in retirement as were spent in the world of work, a careful approach to retirement planning can help guarantee financial stability in what may be a lengthy phase of their lives.
An important first step in the planning process is an review of anticipated social security and retirement plan benefits. Take, for instance, Mary Jo, a classified employee in the Virginia Community College System. An analysis of her current position and retirement status can be seen in the tables. Her VRS retirement income, her social security income, and any other income are estimated to determine if she will have enough on which to retire comfortably.
Calculation 1
VRS Estimate
VRS Retirement Benefit Calculation Worksheet
Name: Mary Jo
Step 1: $20,000 - 13,200 = $6,800 A
Your Salary
Step 2: $ 6,800 x .0165 = $ 112 B
Answer from A
Step 3: 198 + 112 x 20 = $6,200 C
B Years of Service
Step 4: $ 6,200 / 12 = $ 517 D
Answer from C
Formula + 1.5% of the first $13,200 [Step 3 = 198] of average
final compensation (AFC) Plus 1.65% of AFC in excess of $13,200
Multiplied by number of years in service
Calculation 2
Social Security Monthly Income Estimate
Annual Earnings in 1993
$12,000 $20,000 $30,000 $42,000
Age Today
65 529 728 970 1066
61 530 729 973 1082
55 528 728 977 1102
50 502 692 930 1062
45 505 698 939 1074
Result
Mary Jo's Retirement Income Estimate
VRS $ 517
Social Security $ 710
Savings - 0 -
Other - 0 -
Bottom Line $ 1,227
Southwest Virginia Community College President, Dr. Charles R. King, is often quoted as saying, "Proper planning prevents poor performance." In this case, performance could be replaced with the word "retirement." Whether an individual is 35 or 55, it is never too early to start planning for the future. More and more people are selecting to retire before the age of 65 and living more than 20 years in retirement. While the subject of retirement is often not a popular one, the hope for a secure future requires us to consider it.
Richard C. Hudson is dean of financial and administrative services at Southwest Virginia Community College.