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Even with pension, you need retirement planning

Dear Dr. Don,
Does someone really need a huge amount in a retirement account if they will receive a defined benefit from the state beginning at age 55?
-- Cully Cache

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Dear Cully,
A defined-benefit pension from the state beginning at age 55 will reduce the amount you need in your retirement nest egg but doesn't eliminate the need for retirement savings. You didn't mention whether the state pension plan is in lieu of Social Security benefits or in addition to them, but having Social Security benefits kick in at age 62 or older will also reduce the amount of money you need to accumulate in a retirement account. A Bankrate feature, "The right time to start drawing Social Security benefits," has more information about when to start collecting Social Security benefits in retirement.

The other side of the equation is, if you're planning to retire at age 55, you'll want a fairly sizable financial cushion available to you for both unexpected expenses and financial flexibility. Plans to start a second career or work part time will reduce the amount you need in the account.

How you plan to pay for health-care coverage between the time you retire and when you become eligible for Medicare is also an important consideration in setting a target for your retirement account. Health-care benefits paid to retirees by employers can change over time, and you may need a reserve to guard against any changes in your benefits.

Use Bankrate interactive work sheet to help you calculate a target for that retirement nest egg. Also take a look at the retirement planning calculator on the CCH Web site to input the particulars of your situation and see if your retirement savings plan is on track.'s corrections policy-- Posted: Oct. 20, 2005
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