Readying for Retirement

It's no longer speculation for a growing number of Baby Boomers. Retirement age is now upon them.

But the sad financial reality is that, for many of them,retirement may never happen if they wish to stay in the black during their golden years. That's because all too often saving for tomorrow takes a back seat to spending on today. But it's never too late to start a nest egg. Stephanie AuWerter, editor of SmartMoney.com offers some tips.

First, we need to save more! We all know that the best way to save for retirement is to start saving on the first day of your very first job and to keep on going until you retire. But life just doesn't work out that way. Job loss, illness and divorce are many reasons why saving for retirement is put on the back burner. It certainly doesn't help that pensions are going the way of the dinosaur. As are company-sponsored health care coverage for retirees. The bottom line here is we all need to be saving more.

Also, crunch your numbers. If you're nearing retirement age, it's time to know where you stand right now. Take a look at your savings, take a look at your future income streams, like Social Security. Then balanced that against an estimate of your retirement costs. A financial planner can help with this. There's also software out there that can help you do this on your own. Ideally you want to have enough money so that you annual income during retirement is roughly 80% to 100% of what it was pre-retirement.

And catch-up with contributions. It's never too late to start saving, or to start saving more. Conventional wisdom holds that you should save at least 10% of our gross income for retirement. But if you can, try to save more than that. To encourage that, folks who will be age 50 and older by year end are allowed to save more in a retirement plan than younger workers. They can save $20,500 in a 401k plan and $6,000 in an IRA.

Consider not retiring. Like it or not, the definition of retirement is changing. Most folks now expect to work in some capacity during their retirement. Adding to it is the issue that retiring during an economic downturn can have big implications on your retirement finances. Taking withdrawals when your retirement fund is down means you have less dollars invested that can continue to grow. So maybe hold off on retiring for a year or two. Or consider on-going part time work. And don't be afraid to go back to school to learn some new skills.

And finally, think about relocating. For those on a tight budget, moving to an area with a lower cost of living can have an enormous impact on one's quality of life. The key is to find a new community that you can really enjoy. Take your time and maybe try renting in a few places before you commit.

For more tips on retirement and other financial topics, visit www.smartmoney.com.
by Stephanie AuWerter