Oh, Those Golden Years

Most individuals nearing the age of 60 begin to recognize that those long-anticipated years of retirement grow ever closer. Visions of rest, relaxation, golf, and family time dance in their heads.

Unfortunately, many are so eager to abandon the workplace that they ignore details regarding how, or even whether, their retirement plans will work. Others simply procrastinate. For a little help, read through the following seven vital steps to be sure you are financially ready for retirement:

1. Countdown to retirement. At what age do you want to retire? Do you have an idea of your life expectancy, based on family history, lifestyle habits such as exercise or smoking? Will you likely be living in your own home, with loved ones, or does your current health status suggest needing assisted living? Is there debt to pay off first? Honest answers may cause you to adjust your target retirement date. Maintain a yoga attitude about that date – it might turn out to be too early – and make sure you love your job. An extra year or two of work may increase your retirement income enormously, but it’s hard to stick around any job just for the money.

2. Tackle that debt! Nobody wants to enter retirement with debt. Too much debt may postpone your desired retirement date. Calculate what it will take for you to knock out those credit card balances, home equity lines, or other loans in advance. If this appears as insurmountable as Mount Everest, contact a legitimate financial counselor, preferably a Dave Ramsey-certified counselor ( www.victorencinas.com for yours truly!).

3. Insurance In’s and Outs. First, consider purchasing long-term-care insurance coverage. Don’t wait too long past 60 – increased age often brings decreased health, which could lessen your chances of qualifying for such coverage. Find an “A” rated company with good consumer or independent reporter’s recommendations. Second, you may need some form of healthcare gap insurance. Plenty of healthy retirees today are discovering more things Medicare doesn’t cover, and gap insurance can help with those hidden. Medical costs may also include out-of-pocket doctor and pharmacy co-pays.

4. The Budget – New & Improved. The closer you move to that retirement date, the more realistic your budget figures can be. MSN’s Retirement Expense Calculator may help. You’re close enough, you could even test it by living according to the new budget while still working, to see just how realistic it is.

5. Expect long life, low returns; and plan accordingly. With our vast medical technology strides, plan on living to 100, or even longer. This may also mean you have the health to work until 75, but don’t count on that either. Retiring early, withdrawing aggressively (over 3 – 4% the first year), and living long could leave you high and dry in your nest with no egg left. With these in mind, check out those online retirement calculators to see how your investment plan stacks up for the future. Your portfolio may be averaging double- digit returns now, but expect about 7%, the historical norm for a relatively conservative portfolio of stocks, bonds and cash. If the prognosis is grim, think about selling a second car or down-sizing your home to secure a more financially-stable future.

Review Social Security and pension options. Starting at 62 rather than 65 locks you into a lower Medicare benefit bracket for the rest of your life. Unless your life expectancy is low, or you can’t work and haven’t saved enough, just be patient. You’ve waited this long, after all. Also, if you sign up early and continue working, you could lose $1 in Social Security benefits for every $2 you earn (if earning over $12,480 in 2010, for example). Check out the details of pension options with the HR department of your current or former employers. You may have to decide whether you want a lump sum or string of monthly checks for your lifetime, or even you and your spouse’s lifetime.

6. Face death squarely. Our culture avoids talking about death, as if talking about it brings it nearer. You can’t afford not to deal with the topic now, while you still have the health and mental capacity to make your own choices. Update your financial and medical power of attorney documents, as well as your living will, to help professionals and loved ones know who will make decisions for you and when to “pull the plug” if you cannot tell them at the time. Check the dates and beneficiaries on trusts, wills, bank/investment accounts, and life insurance. Make time to think about and discuss these tough issues in advance, at home or in a quiet restaurant. You’ll make better decisions when you and your loved one(s) are more likely to be calm and objective, rather than on the spot arguing about your brother Charlie’s decision-making abilities in front of the lawyer.

7. Seek wise counsel. Mistakes in planning your future could have multiple zero’s attached. You can’t afford not to get an unbiased, experienced second opinion. Find a fee- charging, objective planner who’s experienced with retirement income calculations (non-fee-charging planners tend to be inexperienced and biased by an out-priced product they need to sell you). Dave Ramsey and I recommend Rogers & Kirby Inc. here in Phoenix as your best bet for sound investment planning. They will be happy to meet with you and base their counsel on the same Biblical principles that I employ.