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Tools for planning your golden years

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A HUNDRED YEARS AGO, the average person was expected to live to only age 50. These days, that number is closer to 80. That means, if you retire at age 62 (as many people do), you’ll need enough savings to last you nearly 20 years.

Are you financially ready to forgo work for that long? Read on to find out.


HOW MUCH DO YOU NEED TO RETIRE?

Old rule:
You’ll need 70 percent to 85 percent of your working income.
New rule: It depends. Some people do well with 50 percent of their income, while others need 110 percent.

To calculate the number that suits you, consider first what kind of retirement you want, with as much detail as possible. Then, work backward from there. By crunching the numbers, you may find that you need to work longer, save more or make some trade-offs.

Tools: Retirement-income calculators at T. Rowe Price (troweprice.com/tools) or Money (cnnmoney.com/tools).


WHAT IF YOU DON’T HAVE ENOUGH AND IT’S ALMOST TIME TO RETIRE?

The simplest answer:
Keep working. By working an extra five years, you can raise your annual retirement income by 25 percent, according to a study by Boston College’s Center for Retirement Research.

Another idea: Move to a more affordable house or city. The assets from selling your small home in Southern California, for example, could buy you a mansion in South Carolina.

Tools: Benefits calculators at the Social Security Administration (ssa.gov/planners/calculators.htm) and Realtor.com (in the “Home Finance” section).


HOW WILL YOU PAY FOR HEALTH CARE?
Fidelity’s 2006 Retirement Index projects that someone who retires today without insurance will need about $200,000 over the course of retirement for out-of-pocket health expenses.

One option: If you work for a company with 20 or more employees, you can continue your group coverage through COBRA; it likely will be cheaper than an individual plan elsewhere. After 18 months of COBRA, you’ll be entitled to buy a policy with no pre-existing exclusions in the open market.
Tip:
Consider a high-deductible health plan linked with tax-advantaged health savings accounts.

Tools: Find a plan at Ehealthinsurance.com, HSAinsider.com, Nahu.org or healthdecisions.org.


YOU DON’T WANT TO RETIRE? You’re not alone. A new Merrill Lynch survey reveals that 71 percent of us would like to work well past retirement age, even if it’s only volunteer work. Other studies have shown that working in the golden years makes people happier.

Prepare by budgeting for the training you’ll need to stay “marketable” in the work force. And keep any certification current.

Tools: Aarp.org/bestemployers, SCORE.org.

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