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Ten Tips for a Comfortable Retirement

With a baby boomer turning 50 every eight seconds, there is great interest today in retirement planning. Below are some tips for people in this generation (age 37 to 55 in 2001):

1. Plan for a long retirement. Longevity--the remaining life span for someone reaching a specific age, such as age 65--has climbed dramatically in the 20th century and is expected to continue to increase. Today, retirement can easily last 25, 30, or more years.
2. Plan on retiring earlier than planned. Retirement surveys often find that many workers expect to retire at age 65 or later. However, this conflicts with findings of a recent survey, which found that 70 percent of current retirees retired before age 65. Furthermore, 43 percent of those early retirees said they had retired "earlier than planned," often because of "negative" events such as health problems, disability, or layoffs.
3. Consider working in retirement. While many people are retiring early, more and more "retirees" are working, or expect to work, at least part time. Sometimes this is out of financial necessity, but often it is because they find it enjoyable to work.
4. Plan on taking care of yourself. Social Security will be around in some form, agree most observers, but figure you're still pretty much on your own when it comes to funding your retirement.
5. Consider retirement spending patterns when planning how much to save. You are likely to spend more heavily during your early years of retirement, particularly if you travel or are active in other ways. Spending may slow down as you become less active, and it might spike again in your later retirement years if you have health problems.
6. Plan for non-financial needs. Do you want to travel, move closer to your grandchildren, live in your vacation home, get another education, start a business, volunteer? One study showed that being active with a network of friends is a major ingredient for happiness in retirement.
7. Plan for long-term care needs. Many people mistakenly believe that Medicare will pay for any long-term care needs, such as a nursing home or home health care. In reality, the government will foot the bill only if you are destitute. If you don't think you can afford to pay for long-term care needs, then you may want to consider buying long-term care insurance.
8. Plan your retirement withdrawals. Deciding how best to make withdrawals for retirement--whether to use taxable versus nontaxable accounts first, minimum withdrawal age, lump-sum versus annuity and so on--can make a big difference in how far you can stretch out your retirement nest egg. Seek assistance with large lump sums from a financial advisor.
9. Keep a portion of your assets in stocks or growth mutual funds. Many financial advisors recommend putting enough money in cash or bonds to cover several years of retirement expenses, and the rest in stocks, which stand a better chance of staying ahead of inflation.

This message is sponsored by Rutgers Cooperative Extension. For further information about available educational programs and other services, contact your local Rutgers Cooperative Extension office.