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