(Scott Eells/Bloomberg)

Many Baby Boomers are not prepared for retirement, so they need to get much more savvy about their financial lives, and quickly “if they’re going to have some peace of mind and security during retirement,” says Carla Dearing, CEO of SUM180, an online financial planning service. To make sure you are ready, she suggest that you answer these six questions.

  1.  Have you explored downsizing your living expenses? Your living expenses in retirement will likely be between 80 to 100 percent of your pre-retirement living expenses. By gradually downsizing your spending, you can significantly cut your monthly expenses without feeling the shock of adjustment. Look closer at your monthly expenses and identify items you can do without.  Eliminate a few at a time.
  2. Do you have a clear end game? You may have a good general sense of how much money you need to retire, but you aren’t truly ready to retire until you understand what that means in day-to-day terms. Compare your “retirement number” to your anticipated monthly expenses and make adjustments as needed. You should have an up-to-date and comprehensive financial plan that gives you a clear picture of your financial situation and specific action steps to address any adjustments that need to be made prior to retirement.
  3. Where are you on your debts? You should understand what you owe and how much longer you need to work to get your debts cleared up.
  4. Have you “right sized” your mortgage? You don’t need to pay off your mortgage necessarily, but need to make sure your mortgage payments are at a level you can afford in retirement. Downsizing your home can also be a real opportunity in retirement to cut your living expenses considerably.
  5. Have you considered the different types of income sources available to you in retirement? There are many different ways to patch together the right assets and investments to provide for your retirement. Even if your investment portfolio is not large enough to support your retirement needs, you may find that you have other assets (a business, or real estate) that can contribute.
  6. How would continuing to work at your peak earning years impact your quality of life in retirement? Even one or two extra years of work during your peak earning years could have a significant effect on your quality of life in retirement.

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Question of the week: Some financial planners say expenses in retirement are only 80 percent of what they are when you are working. Others say your expenses don’t go down at all. What is you experience? Did your expenses go up, down or stay the same? Send comments to rodney.brooks@washpost.com. Please include your name, city and state. In the subject line put “Retirement Expenses.”

Last week’s question: What advice can you offer others on saving in an employer sponsored 401(k)? 

Jennifer Parks of Atlanta wrote:

At a minimum, put in whatever percentage is needed to get the match. Please carefully review the plan to understand costs, fees and what you are investing in. The 401(k) fee disclosure is a great place to start. If the 401(k) plan is not good, consider yourself warned and proceed with caution.

Clearly some plans are better than others — bad plans pass administrative costs on to the employees, have a third party administrators (TPA) collecting a fee, a brokers collecting a fee, and high fund fees on top of the normal mutual fund expense fees. These type of plans are enriching everyone involved except the employee saving for their retirement.  All of the company match could be consumed by these fee suckers leaving the employee with nothing but their contributions if they are lucky.

If the plan admin/broker/TPA all have offices in high rent locations, drive expensive cars, and show up in tailor made suits sounding like sales people, guess what — you’re funding it! For example, please see/google John Oliver’s Last Week Tonight’s piece about John Hancock.

Jo Ann Bennett of Annapolis wrote

When I first started working with my financial adviser 11 years ago at age 35, he said “pay yourself first.”  He advised that whenever I got a raise, I should try to live on my previous salary bank the increase. This didn’t always work out, but it definitely helped (and still helps) me save more. So my advice is, always put away something for retirement each paycheck, and whenever you get a raise, increase your savings rate by 1 to 2 percent. You’ll be on your way to a healthy retirement nest egg in no time!

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