MONEYTALK : Countdown to big R
By Hank Ezell
c. 2000 Cox News Service
ATLANTA David and Anna Gines have already built and moved into their retirement
dream house.
The couple is ahead of the game. He is 62, she is 57, and they don't expect to
end their working careers for another three years.
To David Gines, a fund-raising executive for Brenau University, that kind of
forethought just makes sense.
``You have to plan your retirement and your estate just like you plan every day
of your job,'' he said. ``You work all your life to get to that point. If you
don't put together a good plan to utilize what you've accumulated, you've
wasted a lot of your effort.''
Their new house which includes a woodworking shop for him and a studio for her
photo and sewing activities isn't the only thing. The couple long ago
accelerated their savings and investment program, meaning they will have more
gold for their golden years. They have also updated their wills and other
documents, established trusts to minimize inheritance taxes for their three
children and procured all the insurance they believe they will need.
They started the whole process years ago, a practice that financial planners
and consultants urge on all their clients. ``It can be overwhelming,'' said
Marian Davis, a retirement planning consultant with TIAA-CREF, a major
financial services firm. ``You're getting so much information. It's best to
start finding out your options early.''
The first question, of course, is whether you can afford to retire when you
want, with the comforts you yearn.
But saving and budgeting are just the beginning, as the Gines' experience
shows. Some questions are intricate, rather like a machine with a thousand
moving parts, half of which perform erratically.
Not surprisingly, most people bring in experts to help make their decisions.
The Gineses used Davis, as well as an attorney and a stockbroker with
experience in financial planning.
Experts like that suggest starting your countdown to retirement as much as 10
years before you expect to retire.
Here is a checklist by no means all-inclusive of things to do.
-
Right now
Write your wills, if you and your spouse haven't already. A surprising number
people put this off for years.
Consider other legal documents, including living wills and health care powers
of attorney.
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10 years to retirement
Look into long-term care insurance, to cover your expenses if you need to go to
a nursing home or need other specialized care. ``If you can get it in your late
50s, it's definitely more cost-effective,'' said Marian Davis. ``The younger
you are, the cheaper it is.''
Start boning up on retirement issues. Check the accompanying list for books and
Web sites that will help. If you decide to search out a professional, the best
way to start is by asking friends or business acquaintances for referrals.
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Five years to go
Work out an estimate of how much income you will have in retirement. If you are
not getting annual statements from the Social Security Administration, call
1-800-772-1213
and ask for a statement of your earnings and estimated benefits.
If you are eligible for a pension, ask your employer for an estimate of how
much you will have coming.
Factor in the income you can expect from retirement savings accounts, such as
401(k) plans and individual retirement accounts, and any other resources you
have.
Plan your retirement lifestyle. ``Maybe you picture yourself traveling, finally
having time to devote to a hobby or a sport, or spending more time seeing your
grandkids,'' said Nic Pye, a director of KPMG's personal planning practice.
``Visualize what you will be doing seven days a week. Discuss your plans with
your family, and continue this process as you approach retirement.''
Develop a retirement budget. You need to cover the basics but not forget
lifestyle extras.
Pye suggests drawing up a detailed budget, with your spending needs divided
into must-haves, discretionary items and contingency spending. The latter means
making some provision for uncontrollable circumstances, such as illness or
runaway inflation.
For useful calculators to help the project along, go to
KIPLINGER.
Get serious about gaps between the income you expect and how much you want to
spend. A number of adjustments are possible, including increased saving, budget
cuts, putting off retirement or accepting part-time work after you retire.
Start adjusting your investment portfolio. ``It makes sense to re-evaluate, but
not to go to the extreme and put everything into fixed-income investments,''
said Davis. ``Even for a conservative investor, I think keeping at least 30
percent in the stock market, as an inflation hedge, would be a good thing to
do.'' Don't forget, your retirement could last 20 years or more.
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Three years
Start looking at health insurance options. If you're lucky, you can continue
the coverage you have at work.
Review your financial plans. You may need to accommodate changes in your
lifestyle, aspirations or health. You also want to check that you are making
satisfactory progress in your investments and your savings plans.
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One year
Start on projects that are easier to pay for while you still have a regular
paycheck. Extensive home repairs are one example.
Take advantage of medical benefits at work. If you have a flexible spending
plan for medical expenses, use it all up. It's your last chance to use this tax
break.
Also take care of optional surgery or other medical expenses while you're still
covered by the company's health insurance.
Review your pension options. You may have to decide whether to take a lump-sum
payout, monthly payments for the rest of your life or monthly payments as long
as your or your spouse are alive.
Call the nearest Social Security office to set up an appointment and apply for
benefits. It's best to do this at least three months before your retirement
date.
Decide when you will start taking distributions from retirement plans. For this
item, you will almost certainly need to hire an expert.
At all times, stay loose. This kind of planning is a never-ending process, one
that evolves as your life moves along and changes.
Resources for retirement planning
-
Among the many available books, check out ``Get a Life: You Don't Need a
Million to Retire Well,'' by Ralph Warner, $18.95, or
Ernst & Young's Retirement Planning Guide, $16.95
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For general discussions of retirement issues, check out
Deloitte & Touche LLP
,
T.ROWEPRICE
or
Scudder-University
.
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At
TIAA CREF
you can find lengthy and useful articles on retirement.
Search for the library to get started.
-
At
QUICKEN
you can find broad coverage of retirement and
many other personal finance issues.
-
Among estate planning Web sites,
ROBERT CLOFINE'S ESTATE PLANNING PAGE
comes highly
recommended.
Story Filed By Cox Newspapers
For Use By Clients of the New York Times News Service