10 Steps to a Secure Retirement
Planning for retirement it doesn't have the appeal of planning
a vacation or planning a wedding, and many reaction is to put it off.
But here are some of the first steps that experts say workers should
take to ensure that they can afford to enjoy the future.
- Find out what you have coming. Start with Social Security which
provides the single largest source of income more than 40 percent
for the average retiree. You can request a Personal Earnings and
Benefit Statement online at http://www.ssa.gov and receive a response by
mail in two to three weeks. Or you can print out a copy of the form and
mail your request, or request a copy of the form by mail from the Social
Security Administration, WilkesBarre Data Operations Center, P.O. Box
7004, WilkesBarre, Pa. 18767-7004.
- Once you've gotten over the shock of comparing that sum to your
monthly expenditures, find out what you can expect to receive from your
pension plan and what the options are for how it will be paid as
a lump sum, as an annuity, to yourself alone or to your survivors as
- Then calculate what you have in savings plans such as 401(k) plans
and ndividual etirement ccounts and in assets such as real estate. With
employer-sponsored pretax savings plans, make sure you take advantage at
least of the amount that the employer will match. Your employer counts
that money as part of your compensation and offsets it by
lowering pay or benefits elsewhere, so you don't want to leave that
money lying on the ground.
- If you haven't already, start saving automatically no matter how old
you are. You're never too old nor too young to start, say planners. "It
will never get any easier," said KPMG's Martha Priddy Patterson, "and
you'll be surpried how quickly it does mount up."
- Calculate your expenditures and how much of your current income you
will need to meet your goals for retirement. Depending on whom you ask,
the rule of thumb is that you'll need somewhere between 60 and 80
percent of your current income. According to Gregory Anderson, second
vice president of TIAA-CREF Trust Co, lowerincome workers need a higher
percentage of their current income for retirement just to pay for
necessities, while higherincome workers with more disposable income can
live comfortably on a smaller percentage.
- Think about when you plan to retire and how long you might live
after retirement and plan accordingly.
- While you're at it, write a will, sign a power of attorney for
health care, investigate whether long-termcare insurance, which provides
assistance for people who have difficulty with such daily tasks as
bathing or cooking, makes sense and look into estate planning.
- Think about where your savings are invested and whether you should
diversify those investments. The rule of thumb is that you should move
away from higher-return, riskier investments as you move toward
retirement since you won't have as much time to recover from a risk
that pay off.
- Develop a tax strategy to minimize the taxes you pay and to maximize
your retirement income. For instance, if you are single and earn more
than $34,000 a year after you start receiving Social Security benefits,
up to 85 percent of those benefits could be taxed. That's something to
keep in mind if you're negotiating salary for a post-retirement job.
- Factor in special considerations, such as whether you'll be paying
college tuition for a child after you retire, whether you want to sell
your house or move to another location, whether you might receive an
inheritance and, if you are married, how your retirement planning might
be changed by the death or divorce of your spouse.
On top of difficult coming to terms with the end of career and
mortality, financial planning for retirement also is complicated.
"Unfortunately, you need to know a lot to know anything," said Laurence
J. Kotlikoff, professor of economics at Boston University.
© Copyright 1999 The Washington Post Company
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