Retirement Is A Scary Proposition If You're Without A Plan, And Running Out Of Time

Of the 75 million baby boomers nearing retirement today, many are:

• Debt Ridden
• Severely unprepared for retirement
• Under Funded
• Without a Strategy

This is a very serious problem in a country that we can all remember used to assure most people of a retirement where you are taken care of financially.

We all know that social security alone is not the answer to this problem. Many baby boomers are on the cusp of retirement without the ability to pay their basic living expenses with the money they will have coming in after retirement.

This means most will be looking for jobs to compensate, or they will be looking for extensions of their current jobs past the time they had hoped to retire and enjoy their lives comfortably.

Out of embarrassment, many people answer their friends by saying they wouldn’t know what to do with themselves in retirement to justify why they are still working to make ends meet past retirement age.

If you are in the situation above or can picture that situation in the next 10 years, there is something you can do to change that financial prognosis.

First, look at your 401k. Calculate what you could expect at retirement if you could actively manage it up to 8% more in yearly compounded return.

Depending on when retirement is supposed to happen for you, what kind of nest egg does that leave you as opposed to depending on the return you are seeing now?

A very simple but powerful 401k strategy that works with any 401k plan involves two things.

1. Awareness
2. Use of an index fund

By awareness, I mean tracking the value of your 401k holdings on a weekly basis if possible. With this level of awareness you can easily spot a portfolio decline. If it approaches a predetermined amount (5% to no more than 10% suggested) you should switch into a money market. Or if you are well informed and have the ability to do so, switch into an index fund that is designed to profit from a decline (a Bear Fund).

The biggest advantage you will gain is NOT letting your account value sink to such dismal levels where a 40%, 50% or greater gain is required just to get back to even.

This alone could significantly increase the size of your 401k over time.

Is this the only strategy that can safely increase your return rate on your 401k?

Not at all. You just need to know what most people won’t tell you. I have written a book on the subject called “Scientific Wealth Strategies.” You can find it at http://wealthscientist.com

I also have some more retirement strategies and resources located here: http://wwww.retirementinfo4u.com

Whatever your situation is right now, how much time you have left to make a change, and how much you calculate your need to be for a comfortable retirement, you cannot benefit from leaving things as they are.

Only education and strategic investment can net you the returns needed to have a safety net in place so that when you retire, you are not stuck in a constant monthly deficit spending cycle.

That’s not what retirement was supposed to be about. And it doesn’t have to be that way for you!

C.C. Collins is a Wealth Building Advisor and Author of “Scientific Wealth Strategies” at http://wealthscientist.com Find more information at www.retirementinfo4u.com

Talking About Money

With Jim Larranaga

(ARA) - Only one quarter of Americans age 35 and older have amassed $100,000 or more for retirement, according to the Employee Benefit Research Institute's 2000 Retirement Confidence Survey. What's more, the previous year's survey found that 20 percent of "forty-something" workers haven't even begun saving for retirement. If you're among them, you might be in for an unpleasant surprise when you leave your job.

Calculate What You'll Need

Most experts say you'll need 70 percent to 80 percent of your pre-retirement income after you stop working. Given today's life expectancies, you could easily live 20 years beyond retirement. Seeing just how much money you'll need in retirement may give you a few gray hairs, but it can also motivate you to start saving - and fast.

When it comes to saving for retirement, the sooner the richer. The table below shows that for every $100,000 in your retirement nest egg, you'd have to save $2,114 a year for 20 years. Wait just five years to start saving and your annual contribution jumps to $3,598. (That's 70 percent more.)

Savings Goal

How Much to Save Each Year (in a tax-deferred investment with an 8 percent rate of return)

_________________5 yrs______10 yrs_______15 yrs________20 yrs$100,000________$16,944_____$6,805_______$3,598________$2,114$250,000_________42,360______17,013_______8,995_________5,284$500,000_________84,720______34,026_______17,989________10,568$750,000_________127,080_____51,039_______26,984________15,852

The American Savings Education Council reports that those who have calculated how much they'll need in retirement are more likely to save for their goal. And, they tend to save larger amounts. Fortunately, there are a number of tax-favored ways to set aside retirement funds.

Invest Wisely

Employer-sponsored retirement plans, such as 401(k)s, provide one of the best places to squirrel away your savings. You won't have to pay taxes on the money you contribute until withdrawal during retirement.* Plus, the contributions don't count toward your current taxable income. Try to chip in the maximum amount allowed, particularly if your employer matches all or part of your contribution, which helps your money grow even faster.

Traditional and Roth IRAs can also offer tax advantages. With a traditional IRA, you may be eligible to deduct contributions, depending on whether you participate in an employer-sponsored plan and your income. Whether you can deduct contributions or not, your money grows tax-deferred until withdrawal at retirement. Contributions to a Roth IRA are never deductible. But they offer a real plus - tax-free (yes, you read that right) withdrawals at retirement as long as you meet all the requirements.

Tighten Your Money Belt

Cutting unnecessary expenses can help you pare down your debt and boost your savings. Creating a budget may help. List your expenses, starting with the most essential. Make retirement saving a priority. Finally, consider paring the expenses over which you have some control, such as entertainment. You don't have to live like a monk, but I'm sure you can find ways to cut down discretionary spending.

Lengthen Your Timeline

Time equals money when it comes to saving for retirement, so staying in the game for a few extra years can help you stay ahead. Remaining on the job allows your investments more time to grow and may boost your Social Security benefits.

Remember - it's never too late to start building that nest egg.

* Withdrawals prior to age 59 1/2 may be subject to a 10 percent penalty.

Jim Larranaga is Executive Vice President of Priority Publications, a Minneapolis-based publisher of financial newsletters.

Courtesy ARA Content, www.ARAcontent.com; e-mail: info@ARAcontent.com