It's Time to Get Your Retirement Plan in Gear

Whether you’re 22 or 62, the prospect of saving enough for retirement is daunting.

Younger workers have time on their side, but every boomer will tell you: Retirement moves closer every day—whether you’re ready or not.

To get you started, Robert Quinlan, an independent insurance agent/broker of Quinlan Care in New Windsor, N.Y. offers the following retirement planning tips for any age:

Boomer: What is the best way for baby boomers to safeguard their retirement plans?

Quinlan: Get aggressive with your rate of savings. There are online retirement calculators that will detail how much you should be contributing every month to your retirement account(s). Have no savings at age 60, and still working? It’s never too late to get started. If you live to age 80, you will have 20 years to watch your money work for you.

Consider relocating in retirement if you need to reduce your current living expenses if high property or state income taxes are eating too much of your budget now. Now is also the time to make paying down credit card debt a top priority.

It’s also important to evaluate your health and compare it to close family members. Do you have a chronic disease like diabetes or a heart condition(s) that requires medications? You must plan to have a lot more money to cover out-of-pocket expenses regarding drug and medical costs in retirement. Will you be responsible (in part or full) for your parents’ or your in-laws’ elder care?

Are you adequately insured across different parts of your life or business? If you are in your late 40s or 50s, it is time to look at long-term care insurance. Don’t drop your disability income insurance or other business insurance (buy sell or key person protection) coverage until you are retired. Always maintain adequate personal excess liability insurance (umbrella) coverage for your home and autos. If a spouse is still working, maintain adequate life insurance protection. Get health insurance if you don’t already have it. Upgrade it if you want to reduce your out of pocket medical related expenses.

Seek advice from your accountant, a financial advisor or go online to seek explanations for key knowledge about retirement related terms. Insufficient knowledge about money is always costly.

Boomer: When baby boomers leave their jobs, where should they be looking to roll their employer-sponsored 401(k) funds into?

Quinlan: If a boomer leaves a job and has a 401(k) with their former employer, transfer the balance to a traditional IRA or a Roth IRA.

Boomer: What is the difference between a Roth IRA and a traditional IRA?

Quinlan: The Roth IRA offer both tax-free growth and tax-free withdrawals after age 59-1/2 because you have already paid taxes when putting the money in. Roths also don’t have required distributions when you hit age 70-1/2 and later. Your deposits must remain in the Roth IRA for five years before any withdrawals begin.

A traditional IRA offers tax-deferred growth and contributions may be tax deductible. Unlike the Roth IRA, your withdrawals of pre-tax contributions and any earnings are taxable in the traditional IRA.

Boomer: How do I create a balanced 401(k)?

Quinlan: Your retirement savings in a 401(k) should be adequately diversified. Diversified means to divide your money into different “buckets” like cash/bankCDs, common stock or equity mutual funds and fixed income/bonds.

How much you put into each “bucket” is called asset allocation. A general rule of thumb is if you are age 60, put 60% into bond/fixed income equivalents and 40% into equity type of funds. Increase your fixed income/bond portion of investments as you age.

I recommend that you always maintain some equity portion unless you have low tolerance for the equity market ups and downs.

Avoid the temptation of putting all of your money in your employer’s stock.

Boomer: Is retirement planning the same for men and women?

Quinlan: No way. Here’s the good news: Women tend to have more retirement years than men since they have longer life expectancies. And the bad news: women will need more money for retirement, yet on average, they have less time in the labor market than men and have less retirement savings.

Too many women end up living near poverty level after their spouse dies due to reduced survivorship benefits. To increase retirement savings, women can work longer (you must work at least 10 years to qualify for premium free Medicare Part A hospital coverage), seek out employers that contribute/match in a 401(k) or other employer-sponsored retirement plans or open up a mutual fund account.

Use automatic withdrawals from your checking account to fund any retirement accounts. Women also need to be an active partner when it comes to household finances and should understand their tax returns, wills, investments, savings/investments and consumer debt.

The bottom line for everybody is to get started. Don’t be scared to seek advice on tax and investment issues from trusted (and referred) professional advisors. It is not too late to improve your financial affairs. No one else is likely to do it for you. Your efforts today will be rewarded later with a more secure retirement and better sleep today. Stand up more confident today and richer.