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11-15-06

It's a Good Week to Review Your Retirement Plans

You may not realize it, but November 13 through 17 is National Retirement Planning Week - which means it's a great time for you to review your own strategies for working towards a comfortable retirement.

National Retirement Planning Week was established in 2002 by the National Retirement Planning Coalition (NRPC), a group composed of thirteen leading financial industry and advocacy organizations whose goal is to heighten public awareness of the need for individual retirement planning.

And there's a big need for this awareness. Consider the following statistics, taken from a 2005 study by the U.S. Census Bureau:

• Fifty percent of workers have no retirement savings at all.
• Of workers age 55 to 64, 75 percent have household retirement savings of less than $56,000.

Most of these people will be forced to extend their work years or accept a lower standard of living in retirement. If you find both of these alternatives unacceptable, you will need to take action - now.

So, what can you do? Here's a basic "plan of action":

• Estimate how much you'll need. You may have heard that you will need anywhere from 70 percent to 90 percent of your pre-retirement income to enjoy a comparable lifestyle during retirement. As a general guideline, these figures may have some validity, but everyone's situation is different. For example, if you plan to retire early and then spend years traveling the world, you might need to save more money than someone who wants to work until 65 and then stay close to home, pursue hobbies or even open a small business. So, take some time to think about your "ideal" retirement - and then try to put a "price tag" on it.
• Determine your sources of income. Once you know that you will need about "X" amount of dollars per year during retirement, you can turn to the next question: Where will the money come from? You'll need to evaluate all your potential sources of income: Social Security, 401(k), IRA, earnings from part-time work, etc. However, it's not always that easy to determine the precise amounts of money you can count on, especially if you are many years away from retirement. You may want to work with a financial professional who has the tools and expertise to assist you with these calculations.
• Take steps to fill the gap. After you've assessed how much you'll need in retirement, and how much you'll have, you can begin to address the gap that may exist. Now is the time to start considering your options. Are you willing to put off your retirement? Can you afford to delay taking Social Security so that your monthly checks will be larger? If neither of these options sound attractive, consider your savings and investment strategies. Can you put more money in your 401(k) or other employer-sponsored retirement plan? Are you contributing the full amount to your IRA every year? Given your individual risk tolerance and time horizon, is your investment portfolio positioned to provide you with the growth opportunities you need? By focusing on these questions, you can begin to create a long-term investment strategy that can help you work towards your retirement goals.

National Retirement Planning Week lasts just five days - but your retirement plans can benefit you for years. Take action soon.