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  Ask Dr. Don By Don Taylor, Ph.D., CFA,    

Retirement planning starts late

Dear Dr. Don,
I am 56 years old. In a couple of days, I will be 57. I have been a single parent for the past 20 years, raising three kids that are now all grown. At this point I do not have any savings. I'm still working a full-time job, making $33,696 yearly.

How do I (or is it too late) start saving for my retirement? I will have a small pension from my job when I turn 65 if I stay here, approximately $300 per month. It isn't a 401(k) plan. We just got that here this year, so I never paid anything into this plan. My kids are grown and gone. Where do I start?
Jeri Gerontology

Dear Jeri,
Happy Birthday! Congratulations on what you've accomplished in raising three kids as a single parent. A late start is still better than throwing up your hands and hoping for the best when it comes to building a retirement nest egg.

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Three hundred dollars a month may sound inadequate, and it is, but you're still $300 ahead of where you would be if you didn't have this money. Make sure you consider what happens to the pension payout if you should leave prior to age 65 if you're looking at a career change.

If your employer is matching all or part of your contributions to a 401(k) plan, then you should try to set aside enough money to maximize the employer contribution. If the company does a 50 percent match, you make 50 percent on your money instantly by contributing to the plan.

Invest conservatively. It's tempting to invest aggressively to try and make up for lost time, but your portfolio doesn't have any rebuilding years if you should suffer a string of investment losses. You should be concerned about protecting principal, both against investment risk and the risk of losing purchasing power due to inflation.

Consider hiring a fee-based financial planner to help you piece together what your needs are in retirement and what you have to accomplish to have those needs met. The National Association of Personal Financial Advisors can help you locate a fee-based planner in your area.

Take a look at what you can do in retirement to earn money by working part-time. The extra income and benefits earned in the early years of retirement will help your retirement savings last that much longer and it will ease the transition from working full-time to formal retirement.

-- Posted: July 6, 2004

  More questions from Dr. Don

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See Also
A toolbox of tips for Dad's retirement
Rethinking retirement
Financial advice glossary
More Dr. Don stories

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