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March to your own beat when it comes to planning for retirement

By J. GRAYDON COGHLAN, Coghlan Financial Group Inc.
Wednesday, October 5, 2005

According to a recent issue of Fortune magazine, when it comes to retirement funding you are on your own in finding ways to generate income for your golden years.

Social Security benefits on are the decline and President Bush declared that the program was “headed toward bankruptcy” in his State of the Union address this summer. Large companies like Ford Motor Co. (NYSE: F) recently announced that they are suspending matching contributions to the 401(k)s of its salaried employees.

Retirement planning as we know it is becoming obsolete.

The baby boomer’s parents worked hard for at least four decades and then kicked back to enjoy a well-funded retirement for which someone else did the planning. As the boomers are entering what Fortune calls the “longevity revolution” (more people are living longer), gone are the days of relying solely on corporate pensions and Social Security benefits to fund their retirement years.

Beginning Jan. 1, the first of the boomer generation will turn 60 and over the next couple of decades 78 million boomers will reach retirement age – the biggest retirement wave in U.S. history.

Local companies planning for their staff’s retirement needs in today’s new retirement-planning landscape are depending more on outside financial professionals for advice. Here are a few tips to consider when you start planning for your retirement:


Annuities offer you a way to virtually guarantee you will always have money coming in no matter how long you live. Annuities work like a life insurance policy in reverse; instead of making regular premiums to an insurance company that pays a lump sum upon your death, you give the insurer a lump sum of cash in return for regular income for a specific period – usually until you die.

The s ize of the payments you receive and how long you get them depend on whether you choose a fixed payment policy or a variable payment policy. A fixed payment policy’s payout depends on the market’s current interest rates at the time of investment and variable payment payouts fluctuate with the market but offer the possibility of a rising income over time.

Smart stock market advice

It is important to get qualified stock market advice. Many people are wary of investing in stocks but with smart advice about the best companies to invest in, the results may be more profitable than going it alone.

The key is working with a financial professional to put together a diversified portfolio. Many of the best long-term investments are in “tried -and true” products such as toothpaste and ketchup. Many of these types of stocks have proven to beat the market over the long term.

Max out your 401(k) & IRA

401(k)s and IRAs are known as the path to an affluent retirement. If your company offers a 401(k), make sure you are putting as much money as possible into this plan.

IRAs are a source of retirement savings available to everyone, but they are especially crucial for the self-employed, small business owners, workers without company plans and older individuals who have rolled over distributions from former employers.

Customize your IRA

Many people contribute to an IRA, but what many people don’t know is that there are very few restrictions on how retirement money can be invested. Except for life insurance or collectibles, IRA funds can be placed in just about anything. And there’s more good news: Because of the tax-advantaged status of IRAs, Uncle Sam doesn’t take a cut until earnings are ultimately withdrawn from the plan.

Diversify your portfolio

It is best to invest in a variety of investment vehicles in order to avoid placing all of your financial eggs in one basket. Lots of academic research shows that a diversified portfolio can help reduce risk for a given rate of return.

The tips above have only “skimmed the surface” of things you need to know when financially preparing for retirement. Some other things to consider:

  • Some of the best and worst places to invest and house retirement money;
  • The differences between tax-deferred (401(k) plans, variable annuities), tax-exempt (Roth IRAs) and taxable (stocks, bonds, mutual funds, money market accounts) investment vehicles; and
  • Age-based investment strategies for retirement

Bottom line: When it comes to retiring rich, you need a game plan to efficiently plan for your nest egg.

Coghlan Financial Group Inc. has been working with the people and businesses of San Diego on retirement and other financial planning issues since 1992. For more information visit www.coghlanfinancial.com or call (800) 884-5121.

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