Retirement Why Quit for Good, When You Can Quit for the Better

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

(ARA) - If you've delayed planning for retirement because it makes you feel a) old or b) financially inept, think again. With a little foresight, you could be out there enjoying life like other people -- maybe even before you reach the so-called "retirement age."

Like many people in the prime of life, it's not unusual to think of retirement as such a distant idea that you avoid saving for it until next week, next year, next job. After all, who's got time to think about the "R" word? In reality, it's never too late, or too early, to start planning for retirement.

Retirement used to be defined as what a person was no longer doing. More and more, however, retirement has come to mean what a person is can do. Choosing a second career. Traveling to see the world. Volunteering in the community. Taking on a new hobby. Taking care of grandchildren.

If Mondays find you heading for the highway to work, but you'd rather be heading for the golf course to play, it might be time to consider your financial future -- even if you're among the three out of four Americans who hate financial planning.

"You don't need to be a financial wizard to start thinking about early retirement," says Randy Schuldt, vice president with IHateFinancialPlanning.com, a Web site devoted to the 75 percent of Americans who hate financial planning. "With some simple steps, you can take control of your financial future before it starts controlling your dreams."

To help better understand what's involved in retirement planning, IHateFinancialPlanning.com has developed a 10-minute quiz -- an early retirement calculator of sorts -- that will help determine your state of readiness. If your score points to a lifetime of enduring the daily grind, a visit to IHateFinancialPlanning.com or a meeting with a financial planner might help perk up your financial future.

IHateFinancialPlanning.Com Early Retirement Readiness Calculator

1. I dream about my retirement
   1. All of the time
   2. Only when work drives me nuts
   3. None of the time

2. I know exactly what I want to do when I retire
   1. Yes -- in fact I've identified the date
   2. Too many choices to decide
   3. No -- I'll be too old anyway

3. IRA stands for
   1. Individual Retirement Account
   2. Irish Republican Army
   3. IRA -- you mean my cousin Ira?

4. I regularly contribute to my 401(k) at work
   1. At the maximum amount of money allowed
   2. As much as I can afford
   3. Never

5. I expect my health insurance costs to decrease as I get older
   1. False
   2. I'm not planning on getting older
   3. True

6. If I pay off my mortgage before I retire I will be able to
   1. Pocket up to $250,000 in tax-free profit on the sale of my home
   2. Barely scrape by on my other bills
   3. Guffaw loudly because only rich people can afford to do that

7. I can phase into retirement if I
   1. Plan ahead for big ticket items that might tempt me to draw on investments too soon
   2. Take a one month leave from my current job to test the waters
   3. Just up and quit

8. The cost of inflation
   1. Is expected to rise from 2 to 4 percent per year
   2. Is always changing
   3. Will have no effect on retirement plans

9. The nation's Social Security program
   1. Will eventually run out of money
   2. Will cover only some of my retirement costs
   3. Will always be there for me, just like it was for my parents

10. Disability income insurance is
    1. A good idea, since there's a 42 percent chance I'll become disabled between the ages of 30 and 50
    2. Something you should buy if you have a disability
    3. Only for old people

11. A fixed-rate annuity is
    1. A contract with a life insurance company designed to provide for a regular stream of payments at a later date
    2. Too complicated for me to worry about
    3. Considered to be a risky investment

12. The key to early retirement is
    1. Having a retirement goal
    2. Having a job with a good retirement plan
    3. Winning the lottery

SCORING:

Give yourself 3 points for every "A" answer; 2 points for every "B" answer; 1 point for every "C" answer.

36 points: Kiss work goodbye? You may be headed straight for the beach. We'd tell you to pack suntan lotion for when you leave, but then, you've probably already planned that, too.

25 to 35 or more points: So near, yet so far. While you may have a good understanding of what a retirement plan needs to include, it's time to put your ideas into action. Check out IHateFinancialPlanning.com for some easy to understand, non-intimidating ways to fill the gaps of your plan.

16 to 24 points: Minimum effort may not get you where you want to go. Your plans could still use some fleshing out. You may want to consider talking with a professional to help solidify your dreams. Keep your retirement goals in mind and get a financial plan that will keep you headed in the right direction.

12 to 15 points: Early retirement, or any kind of retirement, might not be in your future. Get thee to a financial professional! If the mere thought of it makes you queasy, at least do this: mark your calendar for Feb. 3-10. That's the official celebration of I Hate Financial Planning Awareness Week, a week dedicated to helping people who hate financial planning learn how to deal with money matters and how to manage and invest money. You'll find more information and ways to cope at IHateFinancialPlanning.com. It even has an on-line panic button that you can push to get out your financial frustrations.

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

EDITOR'S NOTE: For more information, contact Maclaren Latta, Carmichael Lynch Spong, (612) 375-8570, mlatta@clynch.com or Stephen Dupont, Carmichael Lynch Spong, (612) 375-8525, sdupont@clynch.com.

About IHateFinancialPlanning.com

IHateFinancialPlanning.com is a Web site that's already helped more than 1.5 million people who hate financial planning make sense of their personal finances through fun, friendly, easy-to-understand content and financial planning tools. The Web site was developed by ReliaStar Financial Corp., a member of the ING Group.

About ING Group

ING Group is a global financial institution active in the fields of insurance, banking and asset management, with more than 100,000 employees in 65 countries. ING provides a full range of integrated financial services for its clients through a variety of distribution channels. In the United States, ING's product and service portfolio includes banking, fixed and variable annuities, investment management, life insurance, mutual funds, personal finance education seminars, and trust services. For employers, ING businesses also offer a full range of retirement and other worksite benefits, including group insurance products. For more information, visit www.ing-usa.com.