Here's the simplified version, the p&q's of actually executing may take the support and help of a professional..

Date:   12/20/2005 1:38:54 PM ( 19 y ago)

Countdown to retirement: Making list, checking twice

Russ Wiles
The Arizona Republic
Dec. 18, 2005 12:00 AM

For millions of baby boomers in their 50s, there's little time to waste in preparing financially for retirement.

Most pre-retirees would be wise to draw up budgets, examine health-insurance options, ponder Social Security moves, adjust their investing and - if necessary - save more money.

The finances of retirement will vary from older baby boomer to younger, from richer to poorer, from more educated to less, from Anglo to minority. advertisement




Many of the more than 75 million Americans born between 1946 and 1964 appear to lack significant savings, meaning many may have to work longer than their parents.

And the life choices of retirement will differ between those who want to exit the work world early and completely to those who want to keep active in business. Add in longer life expectancies and the decline of traditional pension plans, and the math for some could get ugly.

While many boomers will draw traditional pensions and, most hopefully, will be able to cash Social Security checks, most Americans in their 40s, 50s and 60s need to be saving aggressively in 401(k) and other accounts. Some boomers sit on piles of real estate equity thanks to the housing boom and have an option to tap into this wealth through reverse mortgages.

A lot of boomers will need to work to make ends meet; others will do so voluntarily. One-third of newly retired Americans return to work after an average break of 18 months, according to a just-released survey by Putnam Investments.

Any pre-retirement financial checklist should be as comprehensive as possible, and repeated every few years.

"It's not a one-time calculation because things change," said Pat Raskob of Raskob Kambourian Financial Advisors in Tucson.

Here are some key steps:


• Budgeting. You need to know where you spend money now, how that may change in retirement and what income sources from which you can draw. If you plan to pursue expensive hobbies in retirement such as golf or travel, budget for them.

Health expenses pose one of the biggest potential surprises, especially for people leaving employer-subsidized medical insurance plans prior to age 65, when Medicare kicks in.

Neal Van Zutphen of Delta Ventures Financial Counsel in Mesa suggests trying to live within the constraints of a detailed budget before you must.

"Practice that budget for a year," he said.


• Investing. Many people presume they gradually should become more conservative as they near retirement, typically by selling off stocks or stock mutual funds while adding bonds, certificates of deposit and the like. As a rule, Raskob likes to see people ratchet down their risk levels within two years of their expected retirement dates, although this decision also hinges on a person's risk tolerance, wealth level and more.

"I have some clients in their 60s and 70s who still have 75 percent of their portfolios in stocks," she said.


• Insurance. Health coverage poses an obstacle for some pre-retirees. Besides possibly having to buy medical coverage, people in this group still may need disability protection, long-term care assistance and basic life insurance.

The pre-retirement years are a good time to re-evaluate insurance needs anyway while you still can afford the premiums and, presumably, still qualify for coverage.

If money is tight, consider shifting from one type of insurance to another, such as by reducing life coverage once the kids are grown in favor of a long-term care policy.


• Estate planning. The age-50 range is a good time to prepare or update wills and obtain other key documents such as financial and medical powers of attorney, which let trusted friends, family members or advisers act on your behalf if you're unable to do so.

Trusts are another option that can prove handy if you worry about transferring assets to minors or irresponsible young adults. Trusts also are a good way to manage your own affairs in case of incapacity.


• Projecting. You should be able to determine whether your available assets and projected income streams will last in retirement, but you may need to rely on retirement-planning online calculators or an adviser's help.

A careful financial review often provides a wake-up call.

"When people reach their 50s, they often realize they haven't been saving enough," Raskob said. "Some find out they need to be saving 25 to 30 percent of gross income in the next 10 years because they didn't save enough early on."






 

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