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Planning for Retirement

You seem to hear more and more discussion about it. “The Baby Boomers just aren’t making enough preparations for retirement, and it is coming sooner than they think.” If you want to work until the day you reach the Happy Hunting Ground, then this section is probably not for you. If, however, you have some hopes of enjoying your years after work (or are considering an early retirement) then a quick checkup of your plans is probably in order.

As a nation we are going to:

  • 1. Live longer.
  • 2. Need more money to maintain the lifestyles we have established.
  • 3. Need to deal with the erosion of classic retirement plans.
  • 4. Possibly have to deal with the collapse or severe shrinking of the Social Security system as we know it.

Collectively, as a lifestyle, many of us are:

  • 1. Spending more on consumer goods that don’t last.
  • 2. Saving less and less.
  • 3. Increasing our debt load by leaps and bounds.
  • 4. Delaying any retirement planning.

Retiring can be exciting or stressful, depending on your financial situation. If your retirement is the latter because you do not have enough savings, a reverse mortgage can help you supplement your income. To get it you must own your home, live in it full-time and be at least 62 years old. You must also prove through a credit check or other means that you are capable of continuing to pay property taxes and other expenses because you will still own your home and be responsible for those expenses during the loan duration. If you qualify, you must also understand only a portion of your home equity can be borrowed, as determined by a reverse home loan calculator tool. The advantage is you do not have to pay the money back in full until you stop living at the address in question. You can spend the money how you want without added monthly mortgage bills until then.

What’s wrong with this picture? The need to plan for retirement is more crucial than at almost any time in history, yet we are doing less. Yes, many of us are doing well with stock and mutual fund investments in the last few years, but have you ever considered how volatile such investments can be? A 20% “correction” in the market–not at all unheard of–can mean 4 or 5 years less available funds at retirement time. This is why it is crucial to have a coordinated plan for retirement that does not put all of its emphasis on a single source of investment.

  • 1. Assume that the majority of funds necessary for retirement will be your responsibility. Pension funds can change. Social Security may be limited (already the retirement age for full benefits is slowly being pushed back later in life). Things that you may be counting on (like inheritances) can disappear. If you do the majority of the planning for yourself, any other funds that may become available as you age become “gravy” rather than a necessity.
  • 2. Start early in life. The earlier you begin, the less you will need to invest on a regular basis and the more money you will have available for current needs. You may be saying, “well, gee, that’s obvious.” But then why do so many 30 and 40 year olds have absolutely no planning done?Compounding example:

Take advantage of the compounding principle by starting as early as possible and getting a good mix of both safety and adequate returns on your investment. The “Rule of 72” lets you compute how quickly your investment will double in value. By dividing the number 72 by the rate of return will tell you how many years it takes to double the investment. For example, at 5 percent per year, you will double your money every 14.4 years (72 divided by 4 = 14.4). At 10 percent, your money will double every 7.2 years.

  • 1. If you haven’t already done so, begin the process of developing a family budget. Without knowing where you income is going now–and making plans to adjust expenses if necessary–most retirement planning will be futile.
  • 2. Compute your estimated Social Security Benefits. This is as easy as requesting a Personal Earnings and Benefit Estimate Statement (PEBES) from the Social Security Administration. You can request a statement here.

If you are not already on a disciplined saving programget on one now! See some examples on getting started in the article devoted to investing.

Get some expert advice. This may take the form of hiring an investment counselor, or doing some research on your own. A couple of good sources of information are:

The Wall Street Journal Guide to Planning Your Financial Future: The Easy-To-Read Guide to Planning for Retirement and
Baby Boomer Retirement : 65 Simple Ways to Protect Your Future
both available at 20% savings at


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