Media Coverage

It’s not too late to save for your retirement

By J. Graydon Coghlan, Coghlan Financial Group Inc.
Thursday, September 7, 2006

In a recent Gallup poll, Americans stated that planning for their retirement is one of their top financial worries. Of those worried, 52 percent are concerned about the size of their nest egg.
Common questions raised include: Is there enough time left before I retire? Is there enough money for me to be able to save and live comfortably once I retire? What are the steps I am supposed to take to make my retirement work? All of these questions are legitimate concerns as we face the daunting task of planning for our golden years.

As the first wave of the baby boomer generation begins to enter retirement this year, the focus on having and maintaining a comprehensive retirement plan has never been more prevalent.

Most financial professionals agree that a comprehensive retirement plan should include some sort of employer-sponsored retirement plan, such as a pension plan or 401(k), but as we saw in 2005, many employers are cutting back on their retirement benefits to their employees, which makes personal savings plans more important.

Some retirees may find that they haven’t been saving for retirement, or aren’t sure if they’ve socked away enough money. With our life expectancy rapidly lengthening, more years of our life will be spent in retirement than ever before.

Furthermore, it is likely that the days of corporate pension programs and significant company retirement benefits are gone. In order to fund our golden years we need to start with a solid retirement plan to give us as much money as possible for our hard work during our employed years.

J. Graydon Coghlan of Coghlan Financial Group Inc., has been working with many Californians for more than a decade to put together smart retirement plans. He has seen the shift in local companies planning for their staff’s retirement needs to today’s more uncertain landscape. So what ar e your best options for being prepared to live out your golden years?

Read on for a few tips:

Know how to live on a fixed income
Once you arrive at retirement, it’s important to know how much you can spend annually and still have enough to live on for the remainder of your life.
Determine your post-work income (with pensions, private savings and Social Security funds), and then budget to see if you can live on that income alone.
The general rule of thumb is that you will need about 80 percent of your annual pre-retirement income to live on each year after you retire.

Continue working
Many retirees don’t want to think about work after many long years of service, but returning to work doesn’t have to be traumatic. Finding something fulfilling to do, such as a hobby, and getting paid to do it may not be bad if done on a part-time basis. The key to this is that the driving force behind returning to work is finding something that you would enjoy doing — plus the added income and potential health insurance benefits could be an added bonus. According to a Putnam Investments survey in 2005, 68 percent of retirees said they returned to work voluntarily.

Maximize the 401(k)
If your company offers a 401(k) and it includes an employer-matched option, make sure you are contributing as much as you can afford, and at least up to the amount of the match. Not all employers offer matching contributions but if your company does, that extra money can be built into a significant amount of additional retirement savings.

Play catch up with traditional IRAs
A “catch up” provision allows contributors over the age of 50 to add up to $5,000 to their IRA in 2006 instead of the $4,000 for contributors under the age of 50. This allows individuals that are a little older and probably closer to retirement to save a little more. Investment assets in an IRA grow tax deferred and are not subject to income taxes until the time the assets are withdrawn, so every penny you contribute and earn remains in your account until the day you start taking withdrawals.

Annuities
Fixed annuities offer you a way to create an income stream that you cannot outlive. These work like a life insurance policy in reverse. Instead of making premium payments in small increments over a period of time in order for your beneficiary to receive a lump sum payment upon your death, you give the insurer a lump sum at the beginning, which they then use to issue guaranteed income payments to you for a specific period — usually for the rest of your life. The size of these payments generally depends on interest rates at the time the annuity is purchased and the terms of the contract. It should be mentioned that guaranteed income payments depends upon the claims paying ability of the issuing insurance company.
When deciding when to retire you should always consult a financial professional to discuss the best options for your retirement plan.