Refiguring
Retirement
Retirement
planning involves two core tasks: estimating how much money will be needed and
identifying where it will come from. Surveys show that most workers have been
unable to do this very accurately, and that they actually spend more and have
less income in retirement than they expected.
For example, only 13
percent of workers expect Social Security to be their largest source of income
in retirement. In fact, 44 percent of retirees said Social Security is their
largest source of income.1
Whether you are approaching retirement or already retired, you may want to
consider some of these steps to help reduce any gaps between your expectations
and reality.
Take
Advantage of Tax Deferral
Pre-Retirees:
Federal law allows
people aged 50 and older to make increased contributions to tax-advantaged
vehicles such as IRAs and 401(k) plans.2
Retirees: By taking withdrawals
from taxable accounts in the early years of retirement and leaving money in
tax-deferred plans as long as possible, you may be able to increase the benefits
of tax deferral.
Hone Your Expectations
Pre-Retirees: Four out of 10
retirees left the workforce earlier than they had planned, with half citing
medical problems or disability as the cause.3
You might want to prepare for the possibility that you could be forced to retire
earlier than planned, or that medical expenses may be higher than expected.
Retirees: Out-of-pocket
health-care expenses for seniors rose 50 percent between 1999 and 2001. Further
increases are expected as more employers eliminate retiree health benefits.4
Plan to review your financial situation each year to adjust for unexpected
expenses or any additional income.
Stick to the Plan
Pre-Retirees: Creating and
implementing a sound financial program is important, but it’s only half of the
equation. By adhering to predetermined investment strategies, investors may be
better able to weather periods of market volatility and economic uncertainty.
Retirees: The need for a solid
financial plan does not end when you stop working. Stretching money out over a
long retirement may require increased attention to investment performance and
asset allocation.
Even the most detailed retirement plans can change with circumstances. By
staying flexible and preparing for the unexpected, you may be able to handle
almost any situation that may arise.
1, 3) 2003 Retirement Confidence Survey, Employee Benefit
Research Institute
2) Distributions from tax-deferred plans are taxed as ordinary income and, if
taken prior to reaching age 59½, may be subject to an additional 10 percent
federal income tax penalty.
4) USA Today, April 24, 2002
© 2003
Emerald Publications
