| Retirement Planning: Scared or Prepared? | | | | retirement, take full advantage of the time you have |
| By David N. Chazin | | | | until you retire. Obviously, the earlier you begin, the |
| In conjunction with Sagemark Consulting, a division of | | | | more you will end up contributing over time. Additionally, |
| Lincoln Financial Advisors, a registered investment | | | | starting early lets you generate a greater payoff down |
| advisor. Mr. Chazin is a regular contributor to | | | | the road due to the process of compounding -- the |
| PlannerConnect. | | | | process by which the investment earnings you |
| If you are planning on winning the lottery, don't bother | | | | accumulate begin to generate earnings of their own. |
| reading this. For the rest of you, however, it is never | | | | Compounding benefits increase with time. |
| too early to begin planning for a comfortable | | | | Avoid the habit of contributing to your retirement fund |
| retirement. Given the new economic realities of | | | | only if there happens to be any cash left over at |
| retirement planning, building up a nest egg is a top | | | | month-end. Without fail, set aside a specific amount |
| priority. No longer can you rely on the government or | | | | each month for retirement before paying other bills. |
| employer-provided pensions to carry you through your | | | | Saving even a small amount regularly is much easier |
| retirement years. The long-term viability of the Social | | | | than trying to save it all at once. |
| Security system is uncertain, given the crush of aging | | | | Another tip: contribute as much as you can to any |
| baby boomers who will begin retiring after 2010. | | | | tax-deferred retirement plan offered by your |
| Generally, the private sector is shifting away from | | | | employer. A 401(k) plan, for instance, lets you |
| defined benefit plans -- which promise a certain payout | | | | contribute pre-tax dollars and exclude any investment |
| for long-time workers after they retire -- to other | | | | earnings from your yearly taxable income until you |
| types of arrangements like 401(k) defined contribution | | | | withdraw your money later at retirement. As an |
| plans, which place greater responsibility for retirement | | | | incentive for you to save, some employers match |
| investing on employees. Additionally, Americans are | | | | some or all of what you contribute, which can help |
| living longer than ever before, so to avoid outliving your | | | | build up your nest egg even more. Withdrawals prior to |
| savings, you'll need to set aside more now to finance a | | | | age 59 ½ are subject to a 10% penalty and |
| retirement that could last over twenty years. | | | | income taxes. |
| Unfortunately, when it comes to retirement planning, | | | | Choosing the right investments isn't easy. Your portfolio |
| many people are more scared than prepared. Three | | | | will be shaped by several factors, including your age, |
| out of four working Americans are worried about not | | | | time horizon, tax bracket, and risk tolerance. All |
| having enough savings for retirement, yet over half | | | | investments are subject to varying degrees of risk, but |
| have not begun to save for retirement, according to a | | | | one type of risk in particular -- inflation -- is often |
| New York Times/CBS poll. Retirement planning may | | | | overlooked. Inflation erodes the value of your savings |
| seem like a struggle, but you can reach your goals if | | | | over time and takes its toll on most types of |
| you develop a disciplined savings strategy. | | | | investments, including those, which are considered |
| The first step is to set your goals: when would you like | | | | "safe," such as money-market funds. |
| to retire and what kind of lifestyle will you maintain | | | | Naturally, you want to be cautious with your retirement |
| during retirement? Next, you may want to contact a | | | | savings, but investing too conservatively can keep you |
| financial professional to help you estimate what your | | | | from reaching your goals. Avoid putting all your eggs in |
| expenses in retirement will be, how much you will | | | | one basket by diversifying or spreading your savings |
| receive from Social Security and your employer's | | | | among several types of investments, such as stocks, |
| pension, and how much you'll need to make up any | | | | bonds and money market accounts. Diversification |
| shortfall between retirement expenses and income. Full | | | | may help moderate the risks inherent in investing, but |
| Social Security benefits now accrue at age 67 for | | | | diversification cannot eliminate the risk of investment |
| someone born in 1960. | | | | losses. |
| Don't rely too heavily on the rough rule of thumb that | | | | If planning for your retirement seems like a daunting |
| you'll need about 70 percent of your pre-retirement | | | | task, contact a qualified financial professional for help. |
| income after you stop working -- your expenses for | | | | He or she can help you devise a strategy to meet |
| health care and leisure activities, for instance, may | | | | your goals and suggest the most appropriate |
| increase as you get older. | | | | investments for your retirement portfolio. |
| Whether you have 25 years or five years until | | | | |