Retirement Planning Guide:

It wasn't too long ago that most workers in the United States could rely on pension plans supplied from their employers to help them with retirement expenses. Now, as Social Security runs dry over the next 40 years or so, Americans will have to save their own money through 401(K) programs at work or through traditional IRA's or new Roth IRA's. I'm not even 40 yet and I feel like I have a good handle on my retirement planning. I didn't start saving until I was around 30 years old, but I have amassed enough in my retirement accounts that as long as I keep saving each year I should be able to retire with well over $1 million. With inflation who knows what that million dollars will buy me, but that's always been the figure I was shooting for. Financial Planners will tell you to start saving for retirement as early as age 20. That way the compound interest will really work in your advantage and not force you to come up with a bunch of savings later in your work career. You hear horror stories of people with kids in college (tuition = big $$$) and they are winding down careers in the workforce with little or no retirement savings. I think most of them hope their homes will supply enough money to get them through the tough times. One thing I have learned from reading newspapers like the Wall Street Journal and magazines like Money, DO NOT assume your house will supply you with cash for your retirement. You will need a place to live so you are better off saving money over your working years and keep the house to live in.

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More and more people are working in America past the age of 65, not because they want to but because they have to in order to keep up with bills and monthly payments on houses, cars, etc. Those that think they will retire and suddenly stop spending money are fooling themselves. Many studies have shown that spending habits don't change that much after retirement and that people need to be prepared to spend about 85%-90% of their current expenses even after they retire. Most of us don't just sit on a couch waiting to die, we travel, go to museums, pick up golf, go to lunch with our friends, etc. In order to stay busy, you will need money - some more than others. It's very important to do an honest assessment of your spending habits before you retire and then see a financial planner about your plans after you retire. Some people are great at living within a budget, while others don't even know what one is. You can't accrue debt forever since eventually you won't be able to work and pay off bills. You have to find a way to live within your means. Many financial planners that I talked with suggest living on an actual budget before you retire just to see what the ramifications are to yourself mentally and financially as you slowly adjust to less money coming in each month. There are retirement planning calculators (see below) that can help guide you through the process if you are truly honest about where your money gets spent. It's not always easy admitting to yourself that $300+ goes to Starbucks each month or that you spend $200 on green fees. I think that's why more senior citizens are working part-time so they can suppliment their Social Security checks and retirement accounts and keep doing the things they want to. Some excellent sites to visit when you are looking into retiring and all the things necessary to make it a successful one are Retireplan.about.com, CNNMoney.com, Finance.Yahoo.com, and Ssa.gov/retire2. All offer tips and pointers on retirement planning that might be beneficial to you.

Retirement Planning Calculator:

The best calculator we found for planning your retirement finances is at the AARP.org site. You will find the calculator HERE. Enter in your age, retirement age, life expectancy, current salary, desired income during retirement, annual inflation, how much you have funded so far, rate of return on your money, and how much you put into your retirement account each year. There is no secret that you must save to build up money. Few of us will get stock options worth millions or inherit thousands from our parents so we must accept the fact we will have to save money for ourselves. The retirement calculator on the Money.Cnn.com site is also a great retirement planning tool that is easy to use. You may not like the results, but these calculators are designed to start get you thinking about the future value of money.

Retirement Investment Planning:

Part of the stress of retiring is that now you must manage your money so that it lasts over the rest of your life. You have to start thinking about your own death (which most people avoid) and get honest with how your retirement accounts look. Hiring a financial manager is not a bad idea or at least get some advice on your finances. The key is investing in more secure assets like bonds and staying away from risky stocks that might cause your portfolio to suddenly drop in value. After the market crashed in 2001 many soon to be retirees forgot about retiring and stayed in the workplace since their retirement portfolios had dropped significantly in value. Financial planners can help guide you to a solid mix in your retirement accounts to protect your assets the best way possible. Metlife, Fidelity, and John Hancock are some of the major players in the retirement field, but almost any banking institution or investment brokerage will have services in that field as well.

Early Retirement Planning:

Some people don't want to work until they are 60, 65, or even 70 to retire. Life is too short they say to spend working in an office. I have to agree, but the hard part is figuring out how to amass enough savings to get you out of the workforce and into early retirement. If you don't have a rich aunt who left you a million dollars or haven't cashed out with an Internet startup, then you have a lot of money to compile in a short period of time. I know people who retired at 50 and even a few who are younger than that so I know it's possible. The real key is to start saving money right out of high school and put it away in a retirement account. If you consistently put away 10% of your money from a young age you will have a nice pile of $$ when you are 45 or 50. Ultimately, the earlier you retire the longer you need to exist on that savings. With life expectancy increasing we are looking at an average lifespan of well over 90 within the next decade or so. That means you need to have way more money than financial planners ever told you. Retiring early may be a thing of the past if we continue to live longer and healthier lives.

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