Americans Are Lying To Themselves About How Much They're Saving For Retirement

Americans everywhere are underestimating how much they're saving for retirement.

A recent report from the National Bureau of Economic Research found that people will dramatically increase the amount they sock away if you simply explain to them how much their current savings will be worth.

Using a test group from the University of Minnesota, researchers used a formula to show how much would be in their account if they saved a certain amount per year. The result was an $1,150 per-person yearly increase among those who decided to change contributions.

The share of Americans with traditional pension plans has plummeted, meaning that more employees have to choose how much to contribute, according to the study:

Among Americans with pensions, the share with only a traditional defined benefit pension fell from 60 to 10 percent between 1980 and 2003. Over the same period, the share with only a DC plan rose from 17 to 62 percent (Buessing and Soto 2006). Because individuals only have one shot at saving for retirement, the stakes are high and the consequences of suboptimal choices for financial well-being are potentially large.

With Esquire reporting last week that only 58 percent of Boomers have more than $25,000 set away for retirement, the U.S. had better start educating people.

Source: http://www.businessinsider.com/americans-overestimate-retirement-savings-2012-4

How To Plan For Retirement

Retirement is one of the most critical stages of human’s life. Its inevitability makes it one of the most distant yet closed goals. From pre-retirement planning during the active working period to actual retirement planning and post-retirement management, retirement requires an arduous and discipline process.

A new book: Planning for Retirement, written by Mr. Charles Osibodu, a fellow of the Chartered Institute of Accountants of Nigeria (ICAN) offered detailed expositions on various steps and processes to attain successful retirement. Osibodu’s book, launched last week, combined the precious insights of deep knowledge of the subject matter and practical experience of the author, who has taken the same route to achieve a comfortable retirement. Besides, the provision of complementary quotations from the Bible added spiritual balance to the book. The book offers insightful reading.

Retirement generally falls under two categories- voluntary, official and involuntary retirements. Voluntary retirement includes retirement due to personal reason and retirement due to official incentives. Official retirement entails all retirements that arise as a result of statutes, rules and regulations including length of service, age and agreement. Involuntary retirement or forced retirement usually arises as a result of permanent or temporary disability including ill health and death as well as disciplinary actions and lack of requisite skills and knowledge.

Post-retirement period is usually characterized by relatively low income, waning strength, more expenses and diminished socio-economic status. But good planning provides foundation for a comfortable post-retirement period. In ‘Planning for Retirement’, Osibodu outlined what may be described as 17 golden rules of retirement planning. These include:

1. Work hard early in life: The first rule and perhaps the foundation stone of others. Work hard with the knowledge that you will certainly be unable to work or you may not find a work at a period.

2. Go for pensionable and stable jobs: Employment choice is a crucial determinant in the retirement planning process. Stable job with adequate compensations provides stable platform for planning.

3. Cultivate the habit of saving regularly: No matter one’s income, it’s important to imbibe the culture of uninterrupted savings.

4. Develop multiple streams of incomes: Multiple streams of incomes safeguard against constraint and possible downturn that may affect a particular source. When incomes flow from many sources, the person is able to sustain the financial plan irrespective of economic changes.

5. Get a good investment adviser: This provides you with the professional guide needed to navigate investment and economic choices.

6. Take a life assurance policy: Carefully select a reliable insurance company and obtain a life assurance policy, which provides succor to your family in case of untimely death. Some life assurance policies also provide the policy owner with opportunities to draw on the benefits.

7. Obtain medical and long-term care insurance: In the absence of an omnibus insurance policy that include healthcare, obtaining a separate medical and long-term care insurance policy provides you cover against health challenges that may come with old age.

8. Buy or build a house before retirement: Owning a house insulates you from recurrent capital expenditure that comes with rent. Besides, a house provides stability and preserves your social status.

9. Marry early in life: It’s better for a man that has fully matured financially and psychologically to consider marriage immediately. Early marriage allows you to complete huge expenses related to marriage including training the children in good time while you are still active.

10. Carefully select a spouse: A good spouse is an invaluable asset in personal planning; a continuing source of joy and strength. A good spouse is a motivator, a comforter, confidant, adviser and trustee.

11. See to business and financial development of your wife: This will provide a cushion in case of untimely death or involuntary retirement.

12. Educate your children: Do not be miserly when it comes to education of your children, send them to the best educational institutions you can afford. This frees you from future expenses and brings you comfort as they make headway in life.

13. Create a family time: To ensure peace, love and harmony in the family, create a stable platform for interactions no matter the tight schedules and strenuous requirements of your job.

14. Bring up your children in God’s way: Train your children to understand the morals, ethics and lessons in religious teachings. This will impact on their personalities and provide them with a stable compass, even when they are far away from you.

15. Prepare a Will and register it: A Will is a document containing one’s intentions and plans on one’s assets after death. Since death is inevitable, prepare for it by putting your house in order. A will enables you to straighten all issues that may lead to discord and quarrels.

16. Carefully choose your next of kin: The next of kin is the person that you would like to act on your behalf in case of temporary or permanent disability or absence. In other words, someone to be contacted by your employer, banker, investment manager, insurer among others for your entitlements and benefits.

17. Make a good succession plan: This makes life to continue unhindered in your absence. Develop an organogram that lays out functions and responsibilities of your employees as well as the top-down succession plan. It’s also important to decide on who will take over the management of your family business among your children and groom such appropriately.

Source: http://www.thenationonlineng.net/2011/index.php/business/personal-finance/29406-how-to-plan-for-retirement.html

Longevity Must Be Figured Into Any Retirement Plan

People are living longer, which can complicate retirement planning, according to Northwestern Mutual. With longevity on the rise, individual retirement planning needs to include asset accumulation and savings, as well as strategies for managing the personal and financial risks that can arise when you live into your 80s or 90s.

According to the U.S. Census Bureau, there were 720,000 people aged 90 or older in the U.S. in 1980. In 2010, that number increased to 1.9 million. By 2050, that number is expected to be 9 million people.

“Imagine you stop working right now, in 2011, and you must go on to support yourself until 2036. How would you meet your needs, your wants and also handle the unexpected through another 25 years of life?” asked Rebekah Barsch, Northwestern Mutual vice president – market strategy. “When you retire, this hypothetical question becomes very real, and it is only by developing a holistic retirement plan now, and incrementally and consistently working toward achieving that plan, that you can enter a financially secure retirement.”

Northwestern advises its clients to factor longevity into their retirement plans.

“Understanding longevity and the other risks of retirement can be empowering. The good news is that a well-developed retirement income plan can help you weather the unexpected. The key is to start planning now,” said Barsch. “Work with a trusted advisor to align your expectations with your lifestyle and build a plan that will take you through retirement, not just to retirement.”

The Northwestern Mutual Life Insurance Company is based in Milwaukee, Wis., and has $1.2 trillion of life insurance protection in force.

Source: http://www.benefitspro.com/2011/12/08/longevity-must-be-figured-into-any-retirement-plan

‘Plan for Retirement the Day You Start Work’

Chairperson of the Society of Women Accountants of Nigeria (SWAN), Mrs. Tokunbo Obafemi-Adegbola, has advised employees across the country to plan for their retirement early to avoid the shock of a sudden retirement.
Speaking at a one-day retirement for professionals seminar organised by the body in Lagos recently, she said early preparation for retirement also helps to prevent sudden death.

Obafemi-Adegbola said the seminar, with the theme, ‘Preventing the Pitfalls of Unplanned Retirement’, was part of the group’s efforts to make an impact on the society, apart from training youths to become chartered accountants.
“We know that after a good career life, you have to retire into something and it is good to be guided into that retirement. We are guiding people to know that sooner than later, they must retire and when they are retiring from the everyday hustle and bustle of their career, they should know what next to do.

“It is better to listen to professionals and people who had been in it in the past to guide them so that it is will not come as a shock, because when you go into retirement in a sudden way and if it comes as a shock, it can lead to premature death, we don’t want that to happen, we want people to retire and when they retire, they will be able to continue doing things that will sustain them,” she added.
She noted that the programme was targeted at young employees to prepare them for life after retirement and to encourage them to plan early.

“In fact, you should start thinking about retirement and plan for it the day you start working. That way, you would have given yourself a period of at least 25 years, so that by the time it is your turn to retire, you would have got something solid on your hands, even if your retirement is sudden, it will not come to you as a shock. It will not destabilise you,” she added.

Chairperson of the Planning Committee, Mrs. Folake Onabolu, said the group discovered that professionals tend to forget about retirement and the sudden loss of their jobs and other benefits could lead to depression and sudden death.
“We want to avoid this pitfall; that is why we want to sensitise professionals to know that one day, they are going to leave their exalted positions and face life on their own,” she said.

Papers presented at the seminar included, ‘Retirement and Implications of Life out of Office’; ‘Managing your Health in Retirement’; ‘Sourcing and Managing Finance for Success’; and ‘Various Investment Opportunities in Retirement’, among others.

Source: http://www.thisdaylive.com/articles/-plan-for-retirement-the-day-you-start-work-/104808/

It's Never Too Late To Plan For Retirement

The end of the year is a great time to review your finances. Are you saving enough for retirement?

According to U.S. News & World Report, about a third of all Americans have nothing saved for retirement. Fortunately, it's never too late to start building your nest egg.

On this week's Money Matters, financial commentator Greg Heberlein and KPLU's Dave Meyer look at ways to prepare for "the golden years".

First, consider all sources of cash.

Start with the two pillars, a company pension and Social Security. Add in Individual Retirement Accounts and 401(k) or 403(b) retirement plans. Don’t forget to recognize savings in your own name – that is, besides IRAs or 401(k)s -- stocks, bonds, real estate or other investments. If you plan to supplement your retirement income with another job, estimate that.

Second, consider your expenses.

You can actually sit down and determine your current costs month by month. In Greg's case, since his credit card covers most of his expenses, he’d use the latest year’s total as a starting point. Then add in other major expenses such as property taxes, significant cash gifts to family or charity, insurance bills, mortgage payments and car loans.

If you plan to do a lot of traveling, or incur any other major expense after retiring, estimate that now and make it a key budget item.

How much income will you need?

A common rule of thumb is to withdraw 4% of your IRA/401(k) balances a year to ensure funds throughout your retirement. Don’t forget that funds in such plans will go on earning even though you aren’t working. Under the 4% formula, $500,000 in a 401(k) would give you $20,000 a year.

So what if you do the math, and the future looks iffy?

Look for big-ticket ways to save money. For example, doctors and dentists often discount their services for seniors. If travel is important, all sorts of discounts – including many offered through the retirement group known as AARP -- can protect your bank account.

Something of a last-ditch financial tool is a reverse mortgage. You agree to give up your home after you pass on, but you get a steady stream of money throughout. Fees for a reverse mortgage run higher than most other borrowings, but a reverse mortgage can be a useful tool.

Many online sites provide retirement planning for at no cost. Greg likes analyzenow.com. It may look daunting at the outset, but in the end it may provide a clear path through retirement.

Also, Dave found a lot of useful information at U.S News & World Report.

It's easy to find plenty of good retirement planning advice on the Internet. The hard part is mustering up the willpower to actually use it.

Source: http://www.kplu.org/post/its-never-too-late-plan-retirement

Step by Step Prepare a Retirement Plan

According to the financial context the retirement plan actually refers to the finances you ought to save for your life, after getting retired. This plan has become a focal point for many employees who know that few days are left to make money and lead a comfortable life. To continue the luxurious and easy life the proper way is to start saving a moderate amount, so that you don’t feel helpless in your old age.

Money is not the only thing you can save for yourself, but there are other assets as well, which will turn out to be a steady income for you in your retirement. To lead a financial independent life retirement planning is really important.

9 Steps For Prepare a Retirement Plan

1. You should always have a habit to save a moderate portion form your income which will definitely become beneficial for you. Being independent financially is gift of God, but for that you have to spend money very carefully and sensibly.
2. Saving – a beneficial habit
   Consider savings for retirement as your goal and stick to it even if you think that there is still a lot of time left in retirement. There is only one way to maintain your current standards of living, if you start thinking about your future and make it your priority.
3. Plan things out
   In order to sustain your luxurious life style or to live a respectful life with moderate expenses, planning should be the first thing to do. See what will be your basic retirement need and what ratio from your income should be saved. Try to think by going out of the way because planning a head may help you in estimating the correct amount.
4. Participation in the retirement plans
   If your office is offering you a retirement plan you should definitely go through the plan and if it fascinates you do not weight, contribute all you can. Do read the rules and instructions before becoming a part of any retirement plan.
5. Investment principles
   You have the right to know everything about your specific plan, the number of benefits, are they in the form of assets or money, because only then you can judge how you will survive after your retirement.
6. Future financial security a supreme priority
   Do not touch your retirement savings you will definitely regret about what you did. Withdrawing from a saving plan may lead you towards lack of interest that is why never even think of leaving the plan or using the saved amount before your retirement.
7. Suggest your employer
   If by any chance your company or your employer has not introduced you with any sort of retirement plan then go ahead and try to convince him, introduce an easy and simple plan.
8. IRA (Individual Retirement Account)
   IRA provides an easy way to save money, besides that it also gives you a tax advantage. There are few options in an IRA and the tax treatment depends upon those options.
9. Feel free to ask questions it’s your right
   Don’t hesitate if you are confused at any point. Until you are not clear about the entire procedure, you will not be aware of the advantages and any disadvantages if there are any. Consult your employer the bank or your financial advisor to acquire a practical advice and make yourself ready to survive respectfully in your retirement.

Source: http://www.stepbystep.com/prepare-a-retirement-plan-353/

Online Resources To Help Answer Questions On Retirement Planning

When it comes to retirement planning, unusual times may require unusual tactics. Do you need a "practice retirement?" Should you borrow to invest? Here are places to look for some answers.

The upside on real estate is that housing is cheaper than it's been for a long time. Generally speaking, if you've got the cash, it's a good time to buy.

A post at Money.cnn.com describes the advantages and disadvantages of springing for your retirement housing now, even if your retirement is years away. There are warnings about the ongoing costs of owning property, and the caveat not to sacrifice 401(k) contributions for such a real estate deal. Read the advice at is.gd/1jqB8y.

About that "practice retirement?" That's what some money managers are calling a strategy of saving like crazy until you reach age 60, then taking a pause from saving to spend money on fun stuff. All the while, you keep working.

With planning -- and no interruption in your gainful employment -- it can be done, these managers insist. Learn more at the AARP website, is.gd/zHk6xB.

More traditional advice on retirement strategies for uncertain times includes admonitions to work, work, work and save as much as possible. Yet a post at Money.usnews.com notes statistics showing that older Americans tend to opt for "current income at the expense of much larger benefits that they would receive if they waited."

That's not good now that so many people are expected to live longer than ever. Learn more at is.gd/M8LyDS.

Another article at money.usnews.com lists some more unconventional retirement strategies. Academics cited in the article suggest young people borrow money to launch retirement investments, particularly by investing in indexed stock funds. Read more at is.gd/GA8qZ3.

The Retirement Strategies section at Bloomberg Businessweek posts links to new blog items and other publications that deal with personal retirement issues, working and health, for example.

The wider economy's effect on financial planning, bank health and Social Security are among other topics. Check it out at is.gd/erLLDL.

Source: http://www.heraldnet.com/article/20111218/BIZ/712189959

How to Get Your Retirement Back on Track

If you weren't crazy about what 2011 did for your retirement finances, don't fret: The new year will offer some opportunities to get back on track.

The past year certainly didn't make saving and planning for later life any easier. The markets resumed their manic ways. Social Security and Medicare came under fire, raising the specter of benefit cuts. A stagnant housing market continued to hamper relocation plans, and older workers grappled with "staggering jobless periods," in the words of AARP. (The average length of unemployment for job seekers age 55-plus was about 52 weeks, compared with about 37 weeks for those under 55.)

No, the coming year won't solve all these problems. But 2012 should give you several chances to patch up plans for the future. Here's what to look for:

Here a Fee, There a Fee

Employers in 2012 will be required, under new Labor Department rules, to provide detailed information about the fees associated with retirement-savings plans and how expenses in various investments compare. Excessive fees, of course, can ruin a nest egg. The Labor Department offers the example of a young worker with $25,000 in a 401(k). Over the course of 35 years (assuming no additional contributions and an annual return of 7 percent), with a 0.5 percent expense ratio, the employee ends up with $227,000 after fees; with a 1.5 percent ratio, only $163,000.

The point: Spend some time with these new numbers, and at the very least, ask yourself whether a different mix of investments could reduce your expenses, says Robyn Credico, senior consultant at international human-resources firm Towers Watson. If fees across the board are inordinately high, she adds, use the information to lobby management to change savings plans. "You should be asking questions and challenging expenses," Credico says.

Lemons Into Lemonade

Yes, interest rates are low, and the Federal Reserve has promised to keep them that way, at least through mid-2013. This has prompted much hand-wringing about the (virtually) nonexistent returns on CDs and other basic savings vehicles. So take advantage of low interest rates to pay down debt, says Greg McBride, senior analyst for Bankrate.com.

Paying off debt gives you a "return" (in effect) equal to the after-tax cost of the debt. McBride cites the example of a person in the 25 percent tax bracket carrying a line of credit at 3.5 percent. To start, the real cost of the loan (after tax deductions) is 2.62 percent. For every $100 the person prepays each month, that's $2.62 less in interest that has to be paid in each ensuing year. Thus, the return on that $100 is 2.62 percent. (Not bad, considering the even more paltry yields on "safe" fixed-income investments.) If you can knock out such debts before retiring, McBride says, "that will stretch the life of your savings a lot further."

Gifts Galore

The coming year is your last chance to benefit from a big tax break: a generous increase in the gift-tax exemption. The Tax Relief Act of 2010 raised the exemption to $5 million, from $1 million, for individuals (and to $10 million, from $2 million, for couples). As such, you can give away that much without paying a penny in taxes. The catch: The deal expires at the stroke of midnight on Dec. 31, 2012. At that point, the exemption reverts to a $1 million pumpkin.

Kevin Sanderford, president of Colorado West Investments in Montrose, Colo., says he sees a steady stream of clients, particularly those with small businesses, moving assets out of their estates and setting up trusts -- or simply gifting holdings outright to children and other beneficiaries. His recommendation: Start talking with your adviser about this sooner rather than later -- not at year-end. "These are not decisions to make lightly," he says.

Medicare Money

And speaking of the Internal Revenue Service...you can take steps in 2012 to prepare for increases in Medicare taxes in 2013.

As part of health care reform, high-income households (individuals earning more than $200,000 and couples filing jointly making over $250,000) will see their tax rate for Medicare hospital insurance increase to 2.35 percent, from 1.45 percent. These households will also be subject to a new 3.8 percent Medicare "contribution tax" (again, starting in 2013) on certain investment income.

This is the kind of issue that can easily fly under people's radar, says Robert Walsh, founder of Lighthouse Financial Advisors in Red Bank, N.J. He suggests meeting with your financial adviser and tax attorney to discuss tactics -- such as recognizing gains in 2012 -- to help soften the blow to your wallet.

Staying the Course

I'm taking some license here. This point applies to 2012 and beyond. One of the most interesting studies to come out of 2011 looked at investor behavior during the market meltdown of 2008 09. The report, from Fidelity Investments, found that participants in 401(k) plans who dropped their equity allocation to zero between Oct. 1, 2008, and Mar. 31, 2009 -- and kept it there -- saw their account balances increase 2 percent, on average, through June 30 of this year. By contrast, investors who returned to equities at some point saw their balances increase 25 percent. And those who simply stuck with their allocations -- stocks included -- saw their balances jump 50 percent.

If 2011 taught us anything, it's that wild market swings are probably here to stay. If you haven't already, find an asset allocation you're comfortable with -- ideally, one with equities -- and hold on tight. Jumping off a roller coaster while it's in motion is rarely a good idea.

Source: http://www.smartmoney.com/retirement/planning/how-to-get-your-retirement-back-on-track-1322684590500/?link=sm_newsticker

Planning For Your Retirement

Whilst we all accept there are lots of great aspects to retirement, many more require careful planning before you give up work and I intend to go over a few in more detail in my next few postings, writes financial blogger Ed Hill.

The first and perhaps most important action will be for your adviser to undertake a pension audit, as quickly as possible, to ensure you have enough income to enjoy the lifestyle you want in retirement.

The Government is determined to make us all take more responsibility for financial security in our retirement, with the state limiting its support and cutting final salary pensions in response to the global economy and the increased life expectancy we are all enjoying.

Perhaps before looking at financial security, we should consider the provision of care in retirement. Our longevity is a good thing, but it increases the likelihood of a growing proportion of the population requiring some degree of long-term care in their later years.

There are a lot of scare stories surrounding care provision for the elderly, with cost being the number one issue and who pays what, being the second most important question.

The Government tasked renowned economist Andrew Dilnot with assessing the cost of funding care and after a year of evidence gathering his Report was published in July of this year.

His recommendations included capping an individual’s lifetime contribution towards their social care, which is currently unlimited, with support available once the cap is reached. The Report recommended the cap be set at approximately £35,000, with food and accommodation costs left uncapped, but liability limited to £10,000 per year.

Perhaps most importantly, as we begin to look at planning for retirement, the Report recommends the means-tested threshold, above which people are liable for their full care costs should be raised to £100,000 from the current level of £23,250.

Whilst the Report’s recommendations have generally been welcomed, there are many that point out the Government will not be able to afford to implement all the recommendations. And the costs sound intimidating. At today’s prices, the cost of residential care is estimated at almost £25,000 per year, with an additional £10,000 required for nursing assistance.

Whilst medical care should be provided free of charge by the NHS, local authorities will assess the level of social care required and if your capital exceeds the current £ 23,250 threshold, including savings, overseas property, land or business assets, you will be liable for the full amount of care costs. But the important thing to remember is that you cannot be forced to sell your family home to cover the costs of care.

In my next posts I will look at some of the ways to fund the potential costs of care and how early planning can make a big difference to the result, before we move on to keeping your money away from the tax man and selling your business.

Source: http://www.expressandstar.com/business/midlands-business/2011/11/30/planning-for-your-retirement/

Tips To Avoid Coming Up Short In Retirement

How much money can you safely withdraw from your investments once you retire?

This is a subject of wide debate in the financial planning world as our country’s 78 million baby boomers start turning 65 this year. This “withdrawal rate” simply refers to how much you can tap from your investment assets to avoid running out of money before you die. The approach is designed to allow you to withdraw money each year while leaving your principal intact.

For example, if you start with $1,000,000 at retirement and withdraw 4% per year ($40,000), you skim a $40,000 annual gain off the top of your $1 million investment portfolio and always have the $1,000,000 principal until the end of your life. This implies the $1 million keeps growing by 4.2% each year (you need more than a 4% increase to return to $1 million).

Being able to live off interest while retaining your $1 million principal is valuable even if the purchasing power of your principal declines each year with inflation. In other words, your $1 million initial retirement account might only be worth the equivalent of $300,000 after 30 years, but having the equivalent of $300,000 is still a great financial cushion to help keep you from running out of money.

Unfortunately, we don’t live in the predictable world that facilitates an automatic 4% withdrawal rate because markets move up and down, tax rates change, your financial needs change and investments sometimes disappoint. You no longer can simply set the dial at e.g. “4% withdrawal per year” and be assured you won’t run out of money in 30 years.

Here are some things to consider, based upon recent research:

1. People are living longer and longer. It’s not overkill to assume you easily can live another 30 years if you retire at age 65.
2. You can’t control where markets will land the year you retire and begin tapping your investment nest egg. If you had a few bad years before you turn 65, you might start retirement with $900,000 instead of the $1 million you intended. How much you have at retirement also depends upon your portfolio mix in the years leading up to retirement. You should consult with a financial planner or investment specialist to determine your optimal mix.
3. Once you retire, you need to adjust your withdrawal rate “as you go” – depending upon how markets did the previous 3 years. The Wall Street Journal refers to this strategy as “the accordian strategy.” If the market hits a bear market bottom (note: this may not always be obvious), you trim your withdrawal amount by 25% for the coming 3 years. Michael Kitces, a planning strategist, recommends tracking the S&P 500 P/E (price earnings ratio) to determine if the market is overvalued, fairly valued or undervalued. On that basis, he increases or decreases recommended withdrawal rates within a 4.5% to 5.5% range. This approach has been effective in recent years when tested with a 60% stocks, 40% bonds portfolio.
4. Some specialists recommend an even lower withdrawal rate (as low as 2.5% for a moderately conservative 40% stocks/60% bonds portfolio). This means you withdraw $25,000 per year (2.5%) instead of $40,000 per year (4%). Of course we’re talking about pre-tax amounts.
5. One strategy at retirement is to set aside 3 years of cash reserves (what you otherwise would draw from your investments) so you always can suspend your annual withdrawals from your $1 million if markets hit the skids.

We haven’t even discussed the fact that you need to pay taxes on what you withdraw, and you may need significant other sources of income (social security, pensions, savings) to fund retirement. We also haven’t discussed inflation, which erodes the purchasing power of your withdrawal each year unless you increase the percentage you withdraw. Also, our example of $1 million doesn’t go very far toward covering retirement in more expensive parts of the country - you may need multiples of $1 million in addition to social security and a pension (if you’re lucky enough to have one).

As you can see, determining your ideal withdrawal rate is no trivial matter. If you’re calculations indicate you may be coming up “short,” alternatives include retiring later, adjusting your portfolio over time or spending less in retirement. It’s best to seek professional advice if you have doubts or concerns!

Source: http://www.forbes.com/sites/feeonlyplanner/2011/11/28/tips-to-avoid-coming-up-short-in-retirement/

Debts Prevent Majority From Retirement Saving

The survey, which is running in its fourth year, was commissioned by the IFP and National Savings & Investments to mark National Financial Planning week.

It was conducted by YouGov and questioned 2000 people across the UK, revealing that most people see retirement as a “long way off” and are more concerned with paying off immediate debts than planning for the long term.

Among those questioned, 14 per cent said they had not made any pension contributions and a further 31 per cent said they were not contributing to a pension at all, but had contributed in the past.

Two-thirds of women and more than half of the men said they worry about money always or most of the time.

Nick Cann, chief executive of IFP, said: “Yet again this year, our survey findings present a worrying picture for so many people who are facing an uncertain future, yet not taking appropriate steps to improve their financial situation. While accepting that there are things that consumers can do themselves, the services of a professional financial planner are invaluable to help the consumer get the context that they need when planning their finances, and their lives, effectively.”

However, according to the survey, the proportion of respondents who had a financial plan which they drew up and reviewed regularly amounted to just over half those questioned, the same as in 2010.

The likelihood of having a financial plan increased as the respondents got older. Among those aged between 25 and 34, 39 per cent had made a plan, compared to 53 per cent of those over the age of 55.

Just over one-quarter said they could not see any benefit in seeking financial advice, the same percentage as last year, but 17 per cent said it was likely that they would seek advice from an IFA over the next six months.

John Prout, retail customer director at NS&I, said: “Financial planning week highlights the importance for all of us to plan our finances properly, all the more so when money is tight for many people.

“Reviewing our finances, either for the short or long-term, can take many forms, beginning at home by seeking advice from family role models, by contacting organisations such as the Money Advice Service or through paid professional advice. The key is to encourage everybody to plan their finances and to demonstrate the benefits of doing so, for example in saving money through switching utility providers.”

Source: http://www.ftadviser.com/2011/11/25/ifa-industry/trade-bodies/debts-prevent-majority-from-retirement-saving-QoqHHzcJYiVoJfzYnqG5YK/article.html

Self-Employed Failing To Plan For Retirement

In My Prime, a consultancy specialising in older workers, today warned that many self-employed people in the UK are failing to put enough money aside for their retirement.

Small business owners could once rely on using the asset value of their business to fund their retirement, but in the current economic climate this may be not be the case.

Dr Dianne Bown-Wilson, a small business advisor and age management specialist at In My Prime, said that the number of self-employed people with no pension provision is growing.

She also warned that the financial pressures being experienced by small business owners may also be jeopardising pension payments.

However, there are options available to those who may only be able to make occasional payments of varying amounts.

Stakeholder pensions are useful for people with an erratic income or low earnings as they accept contributions as low as £20 and payments can be made at irregular intervals without additional charges being made.

They are designed for people earning between £10,000 and £20,000 a year and the fee for managing them is capped, while for other personal pension products it can be much higher.

Under government rules, the fees on Stakeholder pensions must not exceed 1.5 per cent of the total size of the fund per year during the first ten years, and 1 per cent a year from year 11.

Further advice for the self-employed today came from ifaonline, which reported rumours that HM Revenue and Customs (HMRC) is planning to target the self-employed sector again this year in its efforts to improve tax collection rates.

In 2009/10 HMRC raised £255m by focusing on self-assessment tax returns, 7 per cent more than in 2008/9.

This year it is believed to be planning to target anyone who seems too entrepreneurial.

Source: http://www.financemarkets.co.uk/2011/11/25/self-employed-failing-to-plan-for-retirement/

Millions Plan To Work Past Retirement Age Of 65

The latest LV= Working Late Index suggests that 6.1m people in the UK expect to carry on working past 65, up from 4.5m in 2010. The survey also found that 4.3m who had already retired had subsequently gone back to work.

More than one in four of today's over-50s
expect to carry on working beyond 65

Working Longer

The LV= survey confirms a rising expectation of working beyond 65. This is not surprising, given plans to increase the state pension age (SPA) from 65 to 66 in 2020 and to 67 or 68 after that. At the same time, the government has abolished the default retirement age, so there is no obligation for those who want to carry on working to call it a day.

Earlier this week the International Longevity Centre produced a report on 'gradual retirement', suggesting that many people were happy to carry on working, but might prefer to switch to part-time work or become self-employed. It found that 46% of those surveyed would consider delaying their retirement if their employer offered greater support for reducing their working hours, or flexible working arrangements.

Reasons to return

The latest LV= report found a number of reasons why older workers who had already retired opted to go back to work. The main one, surprisingly, was not to do with money, but because they 'missed being part of the working environment' (32%). Money was a key motive for 30%, however, with 20% saying their personal and/or state pension wasn't enough to support them in their retirement.

Commenting on the 2011 survey, LV= Head of Pensions, Ray Chinn, said: 'The trend of people retiring well into their 60s, or even their 70s, has been increasing slowly over the last few years. The rising cost of living, low interest rates on savings and the fact that as a nation we are living longer has had a significant impact on our retirement aspirations and the amount of money we need to live a comfortable retirement. Our findings have shown that a significant number of over-50s expect to work many years past the state retirement age, and we're likely to see this increase further.'

Pension Planning

A further finding from the LV= survey was that only 14% of over-50s intent to take professional advice about their retirement. Emphasising the important of retirement planning, Mr Chinn said: 'In recent years we have seen many people cutting back on the amount they are saving towards retirement. As a result many will have no choice but to work later in life to maintain an adequate standard of living in old age.

'We urge those nearing retirement not to give up on saving at such a crucial time and to consider all the options available to them, from releasing the equity in their home to looking at more flexible or different types of pensions and annuities. For instance, if people are delaying retirement they are more likely to qualify for an enhanced annuity when they eventually retire, which makes a significant difference to the income they will receive for the rest of their life. It's essential that people seek professional advice about their retirement.'

Source: http://www.which.co.uk/news/2011/11/millions-plan-to-work-past-retirement-age-of-65-272504/

Retirement Planning: Consider Your Time as Well as Your Money

Retirement can be a scary thing. You wouldn’t think so, since so many people look forward to the day when they can stop working and take it easy. However, the financial and emotional adjustments can cause problems if you aren’t prepared for them. Most of us just blindly save money toward retirement thinking that the most important thing is to have enough money stashed away to keep from eating dog food for twenty years. While that’s important, it’s also a good idea to make some contingency plans for the other issues you might face.

The biggest problem is what to do with your time. Most of us can’t wait to quit working, but once we quit, what do we do? We say we want to travel, spend time with family, play golf, or just sit on the porch, but after a lifetime of work is that enough? It might be. Many people find retirement enjoyable. Or you might burn through your “fun” in a year and be stuck wondering, “What now?” The loss of a routine and feeling like you’re no longer contributing to something can be debilitating to those who haven’t seriously thought about their retirement activities.

To avoid this, try easing into your retirement. Keep working while you step down your hours or take a part-time gig. You can even quit your day job and start your own little business, either doing what you did before or something else you really enjoy. You’ll still have more free time, but you’ll also get to keep your daily routine and be productive. You’ll also keep earning money which can be saved or used to delay having to tap your retirement assets.

Keeping busy in retirement is essential to keeping yourself healthy. If you’re just sitting on the couch watching mind-numbing TV, you’re increasing your risk of disease and mental deterioration. Even if you don’t want to work, make sure you have enough hobbies and interests to keep you busy. Let your other interests and hobbies gradually crowd out your work rather than just quitting work all together. When the day comes that you want to quit for good, you’ll have enough other things to do to keep you occupied.

You can also opt to forego retirement altogether. A lot of people feel ashamed to admit that they actually want to keep working. Retirement has been built up as the holy grail and those who choose not to take it are often thought of as strange. After all, who wants to work forever? Well, plenty of people do. Work equals life for a lot of people. If you take it away, they flounder. Such people are actually better off keeping their jobs or moving on to other full-time ventures such as running their own business. Without a job, they get depressed, angry, or anxious. If this is you, don’t feel bad about keeping your job as long as you’re healthy enough to do it.

If you do retire completely, you can make the transition easier by sticking to a routine. It doesn’t have to be the same routine you had when you were working, but a routine can give your days structure and reduce the chance that you sink into depression and wonder what you’re doing with your life. Get up at the same time every day and try to eat at the same times, too. Construct your day as if you were still punching a clock. Use your mornings for exercise and chores, for example, and your afternoons for hobbies or friendly gatherings. A schedule can keep you productive and engaged.

Before you opt to tell your boss to kiss off and retire completely, make sure you’re emotionally and financially ready for it. You can have all the money you need sitting in the bank, but unless you’ve given a lot of thought to your retirement plans, you could be setting yourself up for a few years of confusion. Make sure you have a plan in place for what you will do with your time, as well as your money.

Source: http://www.pfadvice.com/2011/11/23/retirement-planning-consider-your-time-as-well-as-your-money/

Half Fear Retirement Shortfall

Almost half of consumers are not confident they have saved enough to live comfortably in retirement, according to research from the Institute of Financial Planning.

The IFP has published research on consumers’ attitudes to saving for the future and financial advice generally as part of its Financial Planning Week campaign, taking place this week.

Research carried out by YouGov on behalf of the IFP found that of 2,060 people polled, 47 per cent do not believe they have saved enough to provide them with a comfortable retirement.

Just under a third are contributing to a pension, while 14 per cent have never made any pension contributions.

One in 10 of the consumers questioned believe they will never be able to afford to retire, including 12 per cent of over 55s.

Only 4 per cent say they would go to an adviser for help with their finances and 27 per cent could not think of any benefits of using a financial adviser.

IFP chief executive Nick Cann says: “Yet again this year, our survey findings present a worrying picture for so many people who are facing an uncertain future yet are not taking appropriate steps to improve their financial situation.

“While accepting there are things that consumers can do themselves, the services of a professional financial planner are invaluable to help the consumer get the context that they need when planning their finances and their lives effectively.”

Source: http://www.moneymarketing.co.uk/pensions/half-fear-retirement-shortfall/1042135.article

Planning For Retirement Isn’T Just About Saving. Remember To Plan For Retirement Spending Too

When we talk about retirement, usually the conversation centers around how to save and how to invest that savings. Let’s add a third dimension to that discussion: Once you retire, how do you turn that savings into income and make the transition from retirement savings to retirement spending?

It’s a question that many Americans, and even those nearing retirement, may be unprepared to answer. According to a recent survey published by Charles Schwab, one-third of baby boomers who say they are just five years away from retirement have not even calculated how much income they will need when the time comes. Part of the problem, Schwab says, is that individuals haven’t figured out what their essential living expenses will be. More than 76 million baby boomers, or nearly a quarter of all Americans, are approaching retirement age in the next two decades.

The survey of more than 1,000 Americans age 55-70 also found that 64 percent have less than one year of cash savings at any one time for retirement living expenses. Maintaining at least a year of cash to use, along with regular sources of income, to cover expenses is one of the fundamental steps for retirement income planning, Schwab says. Regular, “predictable,” sources of income may include Social Security, pension payments (if you were part of a pension/defined benefit program with an employer), dividend and interest income.

So is anticipating the impact taxes will have on retirement income. Almost half of survey respondents haven’t considered this important expense, and a quarter haven’t thought about tax expenses at all, Schwab says.

Generating income in retirement is an issue that investors are struggling with, and often don’t address until it’s too late, Schwab says. If retirement is on your horizon, the firm suggests some of the following considerations to get you started in the planning process:

1. Consolidate your regular sources of income into a single account, perhaps even into the one with the year of cash, to make it easy to track your daily expenditures.

2. Take a look at your spending, and divide expenses into two categories: essentials and discretionary. Cover the essentials with predictable income sources.

3. Consider measured withdrawals from principal to supplement interest and dividend income. Measured is the key word. Setting up a plan helps to avoid spending savings too quickly.

4. Develop a “drawdown” strategy for your portfolio. Schwab says that this might include taking the required minimum IRA distribution if you are 70 ½ or older; selling from tax-advantaged accounts, first with Traditional IRAs and then Roth IRAs; and drawing principal from maturing bonds and CDs.

Source: http://www.boston.com/business/personal_finance/blog/2011/12/planning_for_retirement_isnt_j.html

Taking Into Account The What-Ifs When Planning Your Retirement

Why does it seem like planning for retirement has become so much more difficult in the past five years? So many folks approaching retirement are scrambling to figure out how much money will be there when they retire, whether or not they actually can retire before they’re 65, and if they’ll run out of money before they leave this earth.

Of course, the main reason it has become so much more difficult for many people is the collapse in equities in 2008 and 2009 along with historically low interest rates. Many people, as well as financial advisors, used to plug in return assumptions that would seem impossible today: Perhaps 8% for equities and 4% to 6% for fixed-income. Those were the days!

Using more realistic returns in today’s world, a lot of us have seen our retirement situation change markedly. Not only that, those approaching retirement are finding out that they were using assumptions that were too simplistic. They ran some numbers, either on their own or with a financial planner, and simply plugged in their investments, some return assumptions, and a best guess at annual expenses. But what many do not think about is the what-if scenarios. Do I need to pay for long-term care insurance? What if I have a large medical expense? What happens if social security is reduced? And what impact would a reduction in my total return assumptions have?

Let’s look at these scenarios I’ve just described. I ran the following scenarios in our Retirement Planner. Readers can also perform some of this analysis, such as changing expenses, social security, and taxes, using our free financial planning tools. The husband and wife in this example are currently 55 years old and they plan on retiring when they’re 65. They plan on spending $50,000 per year in retirement. Inflation is assumed to be 2.5% and their combined social security payments will be $25,000 per year. Lastly, the scenarios below are not cumulative. Each one is separate from the others.

Scenario	Age When Money Runs Out	Total Investment Value at Retirement
Base Case	106	$1,972,494
Long-Term Care Ins. ($5,000 per year starting at age 60)	100	$1,932,865
Large Medical Expense ($50K at age 75)	104	$1,972,494
Social Security Payments are Reduced by 20%	102	$1,972,494
Total Returns Reduced by 2% Before Retirement	102	$1,831,348
Total Returns Reduced by 2% Before and During Retirement	95	$1,831,348

Interestingly, the recurring expense of long-term care insurance is actually much worse for this couple’s retirement situation than a large medical expense of $50,000. If social security payments are reduced, this couple will see their money run out four years earlier than they initially expected. The worst scenario for them, however, is total returns on their investments not being what they originally had hoped for. The original assumption was 6% returns before retirement and 4% during retirement. If these assumptions are off by 2%, this couple will see their money run out a full 11 years earlier than they had originally thought.

Over longer time frames nothing has more of an impact on a person’s retirement portfolio than total returns. That’s why it is so important to have a good strategy early on when it’s more appropriate to take more risk in order to gain a higher total return. For those who are not near retirement yet, I am a big proponent of taking on more risk in one’s tax-deferred accounts where you don’t have to worry about withdrawing money for years. This includes low cost emerging markets ETFs such as DEM and EEM. Investors now even have access to “frontier” markets via ETFs, with vehicles such as FRN. A good portion of my IRA is in emerging markets simply because I know I can’t touch the money for years so the higher volatility of emerging markets don’t cause me to lose any sleep at night

I also believe it is extremely valuable to put together a basket of solid dividend paying stocks, such as Coke (KO) and Johnson & Johnson (JNJ), which have consistent and relatively high dividend growth over time. I discussed this recently here.

It is important to sit down and come up with these types of what-if ideas when planning out your retirement. It’s better to figure it out now than to be surprised later.
Source: http://seekingalpha.com/article/311816-taking-into-account-the-what-ifs-when-planning-your-retirement

Couple Should Plan For The Unexpected, Eliminate Debt And Refinance To Set Up For Retirement

As public employees, Paul, 45, and Yanna, 36, can expect healthy pensions when they retire. It’s their finances today — along with college costs for their three children, 14, 9 and 6 — that they’re most worried about.

"I have two incomes and my wife has one income," Paul says. "We are trying to get rid of our $7,500 credit card debt. My ex-wife is also trying to get more money out of me. I don’t know if we can afford it all."

The couple is also facing increased expenses for their pension contributions and health care costs.

The couple has saved $15,700 in a 457 plan, $9,300 in a 401(k), $1,000 in an IRA, $6,900 in a brokerage account, $1,000 in mutual funds, $550 in savings and $200 in checking. They’ve also set aside $12,800 for college expenses.

Paul could retire today and receive a $5,529 per month pension, which could increase if he continues working. Yanna will also receive a pension, worth about $2,000 a month at age 60.

The Star-Ledger asked Jim Marchesi, a certified financial planner with Mill Ridge Wealth Management, to help the couple get on more solid financial footing.

"They are focused on determining what needs to be accomplished to ensure financial success," Marchesi says.

Things can happen, and they usually do, Marchesi says, such as $1,400 dental bill the family just got slapped with. For moments like these, families to have a "just in case" buffer built into their normalized expense patterns, he says. That way, if an unexpected cost comes in, they’re not selling long-term investments at an inopportune time to cover the bill.

The couple is on the right track to improve their monthly outflows. They’re paying down their credit card at a good clip, and the debt — as long as they don’t add to it — would be eliminated in about three years.

Additionally, in eight months, they will have paid off one of their cars.

Together, these payments total over $500 a month.

"Once this cash is freed up, a portion of the car payment should get redirected to a reserve fund to be used for car repairs, and the rest should be redirected towards college and retirement accounts," Marchesi says.

Another area in which they can save is their mortgage. If they plan to stay in their home, they should look into refinancing their 5.25 percent 30-year loan. Marchesi says they can probably get a rate in the 4 percent range, which would reduce their mortgage payment by a few hundred dollars. Those dollars could also be earmarked to accelerate debt repayment and increase long-term savings.

Looking ahead to retirement, both Paul and Yanna will receive significant pensions when they retire. Paul will max out his required years of service in five years — maxing out his pension — and he will have employment options in the not-too-distant future.

Paul can expect a pension of $72,000 a year at age 50, and Yanna will receive a projected amount of $24,000 a year when she turns 60.

The reality of the times, though, significantly reduces the chances for any cost of living adjustments to their projected pension payouts, Marchesi says, and that means their pensions will be less valuable in retirement.

For example, a $72,000 pension in 2011 will have purchasing power of about $44,000 in 2031, using historical inflation data. With that, the couple must continue building their other retirement assets.

Marchesi says if they can double their supplemental retirement contributions to $1,200 a month, they’d have a retirement asset base of around $500,000 to supplement their pensions in 20 years.

To achieve the expected rate of return over that time, Marchesi says they’ll need a two-pronged approach. Their assets need to be managed for a target rate of return — to earn 3 percent to 4 percent over inflation — as well as managing the assets for the given market environment.

Aside from retirement, the couple is saving toward college educations for their three children — $100 a month into 529 plans for each.

With the national range of college costs at $13,000 for public schools or $30,000 or more for private, Marchesi says they’d have to save more to cover 100 percent of costs. Paul and Yanna say they realize the children will need some loans, and they hope to help in the repayment.

While retirement is years away, Paul and Yanna need to spend some time thinking about what they want their retirement to look like. Their home, if they stay with the same mortgage, would be paid off in 2039.

Their projected pensions, potential Social Security benefits and retirement accounts would provide for a lower expense level than they are currently running for the household, Marchesi says.

While household costs will reduce when the kids are out of college, travel, health and family-related costs will most likely increase, Marchesi says.

"As some of their fixed costs are reduced over the next couple of years, it will be important to rededicate those cash flows towards identified goals, and not toward increased discretionary spending," he says.

Source: http://www.nj.com/business/index.ssf/2011/12/couple_should_plan_for_the_une.html

Planning will Make for A Happier Retirement

Once again, I am worrying about the financial future of Canadians.


I'm not referring to the European debt crisis, the weakening world economies, the prospects for slow growth and the volatile stock markets. These are all real sources of concern, but I'm thinking more of things we can control.

Recently, study after study has shown a shocking number of people in Canada are trying to retire while carrying large amounts of debt. It appears our period of low interest rates has helped people decide this is a burden they can afford.

That may be true while interest rates are low, but it's a scary proposition if rates rise even two per cent. At that point, they would still be near historic lows, but a lot of people with variable interest rate loans would have seen the payments increase significantly.

Here are some of the statistics that have scared me lately. I have to give credit to Gordon Pape for compiling these (and to the various financial institutions that financed the research). I introduced Gordon recently at the annual Knowledge Bureau Distinguished Adviser Conference and was then shocked by what he had put together.

We know from Statistics Canada that, on average, Canadians owe about $1.51 for each one dollar of income, the highest level ever. Apparently, this trend is not restricted to young people. A recent poll sponsored by RBC showed only 56 per cent of Canadians will retire debt-free.

Ironically, a CIBC survey in August showed the majority of Canadians believe they will be debt-free by age 55, but only one-third of respondents aged 55 to 64 were actually debt-free.

The scariest survey of all showed five per cent of Canadians are counting on a lottery win to fund their retirement! (We have always referred to this as the LRSP -- Lottery Retirement Savings Plan.)

People are worried and having a harder time making ends meet. Many report an inability to reach their annual financial goals, but since it appears only 20 per cent of Canadians have a financial plan (SunLife and other surveys), I'm not sure how these folks really know if they are reaching their goals or not.

A financial plan establishes specific, measurable goals, for short term and long term. It sets up specific steps to be followed in order to reach those goals and establishes regular points of measurement of success, or the need for adjustment.

For people who have a specific goal of being out of debt by retirement, it's a straightforward process of calculating the amount of extra payments required on those debts to extinguish them by a certain date. The financial plan would decide where that money will come from, and the system will be set up to automatically to make it happen.

Discipline will be required to follow the plan and avoid incurring debt elsewhere, obviously, but what I have found again and again is that a little bit of success is a huge motivator. It's just like going on a diet and exercise program to lose a set amount of weight -- when you see progress, it's much easier to make all of those little positive choices.

The first 21 days of the new behaviour are most difficult, but after that it becomes habit. With financial behaviours, many of them only occur once a month, so a longer period of time may be required to make them habit, and you may only see the results after several months or even a year.

In this case, your motivation can come from developing a powerful vision of how wonderful it will feel to be debt-free (or 10 pounds lighter), and picturing that vision daily.

Here's some extra motivation. The 35 per cent of people who have talked to an adviser, and 20 per cent of people who have a financial plan in place, are more than twice as confident about reaching their goals, and they have significantly fewer money worries.

Those facts alone should make it worthwhile. With holidays coming up, you have a realistic opportunity to set some time aside to develop specific goals and plans.

Right now, commit to an hour this weekend to refine your vision and write down the specific goals and steps that will take you there. I guarantee you will feel better on Monday.

Oh, and please don't go into debt buying Christmas presents. Your recipients would be happier you didn't.

Source: http://www.winnipegfreepress.com/opinion/columnists/135724958.html

Design A Countdown to Retirement Plan

Retirement can be some of the most rewarding years of your life.

Yet many people jeopardize the quality and security of their golden years by not planning. They spend their 20s searching for a partner, their 30s climbing the corporate ladder and their 40s juggling work meetings and their children's soccer games. As retirement nears, they fret about how little they've done to prepare for the next few decades of their life.

One of consumers' biggest problems? Not saving enough — or sometimes, at all — for retirement.

A Harris Interactive survey conducted in November 2010 found that more than one in five adults over the age of 65 had not saved for retirement. Among adults of all ages, one in three had not saved for retirement.

Mike Smith, however, began saving in his 20s. Smith, 55, put away 8% of his income and then eventually increased it to 10%. He believes he'll be able to retire in the next few years because of his careful planning.

"The only thing I advise my children is to start saving early," says Smith, of Seattle.

Saving money early, and often, is one step to making your golden years secure. Here are others to consider as you approach retirement.

15 years before retirement

If you don't have a financial plan, now's the time to make one. This will allow you to track your savings and help you figure out how much you need in retirement so you won't run out of money.

"When you're 15 years away from retirement, that's when you have time to plan and make corrections along the way if markets don't perform well," says Wei-Yin Hu, director of financial research at Financial Engines, a provider of financial advice for 401(k) plans.

Your finances can also recover if health emergencies arise.

When Roy Emmett was in his late 40s, his daughter needed a bone marrow transplant. The operation depleted his savings.

"I had my furniture and my two cars when I got through with that," says Emmett, who retired this year at 66.

He rebuilt his nest egg by saving 15% of his income each year. He also cashed out of stocks and put his money into bonds in the fall of 2007 to lock in gains. By doing so, he dodged the market turmoil that followed as the U.S. economy slipped into recession.

To help you get started with retirement planning, websites including analyzenow.com, troweprice.com and vanguard.com provide free tools.

If you need a professional's help, check out the National Association of Personal Financial Advisors, an organization of fee-only planners, or the Financial Planning Association, a trade group for planners who charge fees as well as commissions.

10 years before retirement

If you expect to downsize to a smaller house in retirement, consider doing it sooner rather than later.


The savings you get from moving to a smaller, and hopefully less expensive, home will have more time to compound, says Henry "Bud" Hebeler, a former Boeing executive who developed retirement planning website analyzenow.com.

A smaller house could mean lower utility and tax bills. And downsizing can give you a cash buffer as you approach retirement so you don't have to tap into a 401(k) or individual retirement account, which could subject you to a 10% early-withdrawal penalty and ordinary income taxes if you haven't reached 59½.

A decade before retirement is also a good time to think about honing a skill that could generate income for you in retirement.

Another way you could use this skill, whether it's fixing a car or making a cake, is by trading services with other retirees, says Hebeler, the author of Getting Started in a Financially Secure Retirement.

Review your financial plan. Changes in your life — maybe your kids require more financial support or you won the lottery — in the last few years may mean that you have more or less money. That, in turn, could force you to adjust your savings level and your retirement date.

5 years before retirement

Five years before retirement, Norman Boone, president of Mosaic Financial Partners in San Francisco, advises his clients to build a bucket list of 50 things they want to do in their golden years.

"Having a vision of the things you want to do will make it more likely that you'll actually do them," says Boone. "We find that the first 20 to 30 are usually pretty easy, then the really meaningful things start to come out."

This list will also be helpful in thinking about how much you'll spend in retirement. In Boone's experience, clients tend to spend more per year in retirement than when they were working. Retirees may spend more on medical and living costs, as well as on vacations and family visits.

Start thinking about when you want to take Social Security benefits. The longer you postpone Social Security payments — until age 70 — the bigger your monthly check. But delay these payouts only if you expect to live for many years in retirement.

Other smart moves: Pay off your mortgage before retirement. And, try living for one year on your retirement budget.

"That's the acid test," Hebeler says. "If you can't do it for a year, how do you think you'll do it for 30 years?"

Source: http://www.usatoday.com/money/perfi/retirement/story/2011-12-15/planning-your-retirement-at-all-ages/51980930/1