Retirement Planning

Many no longer have jobs with built-in pensions plans.

Most of us have to do it ourselves with a largely self-guided 401(k) or similar retirement plan. Add in the need to pay a mortgage, insurance, maintain an emergency fund and maybe set aside some money for the children’s education and possibly provide financial help for an aging relative and things can get stressful, especially when you consider the questionable status of the Social Security system. While one day it’s seemingly diapers and formula, the next its college tuition, what to do with mom and dad and ultimately, how will I ever be able to afford to retire?

Meeting long-term financial goals means monitoring your investment progress to be sure it stays true to its objective. This means regularly reviewing your budget, savings, income and risk tolerance, including adding to your savings/investments and making adjustments as needs and circumstances change.

Today there is a wide variety of financial services and products, but not all financial professionals have access to them or the skill and experience to properly utilize them. Others believe they are “reserved only for the wealthy.”

It is possible however that you can experience a new level of personal financial management. Independent financial advisors are not bound by any sort of “preferred products list” or “house products.” Nor do they need to meet sales quotas.

Did you know that independent financial advisers typically use products and services from numerous providers, giving clients access to an in-depth variety of highly efficient financial services and money managers? Independent financial advisors practice an “independent” approach that is often supported by an in-depth investment in numerous, objective, third-party research services with one goal in mind -- to put the most efficient products and services available to work for you.

Another question to ask: Is your present financial advisor a “fiduciary”? A fiduciary is required by law to act in your best interest – no exceptions. Stockbrokers are not. Is your financial professional a fiduciary or a broker? A broker does not have a fiduciary responsibility. The law only requires that brokers recommend investments that are “suitable” for you but can consider the commission or bonus they may earn. In other words, while an investment may be suitable, it may not be the “best choice” for you. A fiduciary always acts in your best interest.

It's Never too Early to Start Planning for Retirement

Nor is it ever too late. That's good news for many of us. Whether retirement is five years away or 20, you can start preparing now. Below is a list of seven items you should consider when thinking about your financial future.

1. The Graying of America. We’re getting older. Our country’s population is aging, living longer and often retiring sooner than expected. What this means is the risk of outliving your retirement savings (and other assets) is at its greatest.
   
   
2. Health Care – the Wild Card. Health care expenses are a leading concern, especially for those aged 45 and older. Even with Medicare, the average American may need substantial assets to cover health care costs during retirement.
   
   
3. Social Security. Not even in its greatest day was Social Security intended to be one’s major source of retirement income, yet some two-thirds of retirees actually depend on it for half their income. The program’s health is questionable, meaning it may be time for you to take your own steps to meet the retirement income challenge.
   
   
4. Taxes. While your mortgage is designed to end one day, taxes will always be with us and in many cases are the single greatest monthly expenses for most American families. In some cases, they can account for 30% of a monthly budget. Many indicators show this percentage will continue to increase.
   
   
5. Where’s My Pension? Only some 20% of American companies now offer pension plans and it’s estimated that some 1,000 employers discontinue their pension plans each year. This means the responsibility for saving for retirement has never been more important.
   
   
6. Inflation. Buy gasoline lately? How about stamps or groceries? Nearly nothing costs what it used to. Since 1965, inflation has averaged 4.6% annually. Someone earning $50,000 a year today will need more than twice that in 25 years to maintain the same lifestyle.
   
   
7. Got Savings? Americans are generally severely “undersaved” and as a result, financially unprepared for retirement. Setting up an automatic savings and/or investment plan can help you bridge this gap.

Retirees and pre-retirees must learn to adapt their savings and withdrawal strategies to a changing lifestyle and financial environment. If retirement is approaching or you’re already retired, you'll need to consider your age, life expectancy, living expenses and rate of return on your investments when making your long-term financial plan.

Assuming your retirement savings are worth $1 million, a typical withdraw rate would be 4% or $40,000, the first year. Assuming an annual inflation rate of 3%, multiply that amount by .03%, would yield a withdrawal amount of $41,200 the second year, $42,436 the third year, and so on. But life does not often work in a neat, mathematical formula. There may be market crashes or unexpected health expenses to meet. Therefore, each of us needs an emergency fund. You should also pay close attention to any tax-advantaged accounts you may have, such as IRAs and 401(k) plans.

Today there are many so-called “guaranteed-income products,” most of which have been designed to help protect retirees from running out of retirement income regardless of market conditions or increased longevity. Insurance can help families manage the risks of not living as long as expected, while various retirement-income products can help manage the risk of outliving your retirement savings.

Since retirement can now last 20-30 years, planning today can help you tomorrow. You may be concerned about:

• Outliving your assets
  
  
• Stock market volatility
  
  
• Our Social Security system
  
  
• How to best manage your money.

Don't Wait to Learn About Social Security

Whether retirement is around the corner or years away, it’s good to know that Social Security is working for you now by providing the information you need to plan ahead for your retirement.

One of the best tools for planning a secure retirement is at www.socialsecurity.gov. When you create your personal “my Social Security online account,” you’ll be able to get your online Social Security Statement, review your lifetime earnings history (and catch any errors while it’s easier to fix them), see future benefit estimates and more important information that can help you plan and save.

How to Get Started

Opening a “my Social Security” online account is quick, safe, free and easy. It takes only minutes. Go to the Social Security website: www.socialsecurity.gov and then click on “my Social Security.” Follow the instructions for creating your secure, online account. You must be at least 18 years of age and have:

• A valid e-mail address
  
  
• A Social Security number
• A U.S. mailing address.

You’ll also need to provide some personal information and answer some questions only you are likely to know. This process protects you and keeps your information private. There are extra security features, too. You can have unique text message codes sent to your cell phone each time you want to sign in. There’s even an address bar at the top of your screen indicating the website has an extended validation certificate. This means the information you provide to Social Security will be encrypted and that the website has been verified by a certification authority.

Now What?

Once you see your estimated retirement benefits, you can really start to plan, invest, and save with more confidence. You can even explore when you might retire.

While Social Security will be here to provide you with a secure foundation in the future, it was never intended to be your sole source of retirement income. You may want to put aside more for a comfortable retirement. And once you do retire, or start receiving benefits for any reason, your “my Social Security account” is the best place to manage those benefits. You can use your account to get an instant benefit verification letter, change your address and phone number on Social Security’s records, and start or change direct deposit of your benefit payment.

More than 11 million people have opened a safe and secure “my Social Security account.” To learn more visit: www.socialsecurity.gov. (NAPSI)