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Retiring in a bad economy: Plan ahead

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Think long term
Benjamin Tobias, a Certified Financial Planner in Plantation, Fla., wants clients to have three years of living expenses set aside in money market funds or Treasuries if they're using the portfolio to provide income. Periodically, when one particular asset class has performed well, it is sold and the proceeds go into the money fund to bring the client back up to the three-year reserve.

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"We did that in 2000-2002 and it works very well to keep people from panicking because they know this money is going to be there. If you buy into a long-term investment philosophy, you know that things are going to turn around and this gives you the time to wait for it to happen."

But many people don't have the money needed to give them that cushion; whether due to a lack of income or financial planning. Juetten, who doesn't require people to have a certain amount of money before he'll take them on as clients, estimates that only about one in five of the people who come to see him have done a really good job of planning for retirement.

"First, we deal with the human side. Fear and concern are normal. The news is all around us and it's hard to ignore. People going into retirement are the ones who are most aware of their financial situation because all of a sudden it's right in front of them. Second, we talk about the short-term cash needs and, third, we look at the portfolio.

"If you haven't done a good enough job preparing for retirement, your options are fairly limited. You can work longer, live on less or work in retirement."

Lessons for younger people
Younger people who have time to save for retirement have an opportunity to learn from these economic cycles and avoid the frayed nerves that so many older people are experiencing.

Monica Kulaga of Madison Heights, Mich., says she and her husband James, both 36, have been careful spenders and savers for years and, while the process isn't painless, they can see how it's going to pay off. Even now, with Kulaga staying home to care for their 2½ year-old daughter, Lily, they're still managing to save about 20 percent of her husband's $70,000 salary. She says their savings habit enables her not to worry about recessions and bad stock markets that will inevitably occur in the years ahead.

"We've saved so well that I've never really worried about money. I used a calculator where you enter all your information and it tells you whether you'll have enough money to meet your goals in the next 30 years. We'll have more than enough."

The Kulagas' life isn't without sacrifice, but they're not into total self-denial. They eat out and take frequent vacations, but they both drive 10-year-old cars and are leaning toward repairing their aging dishwasher rather than replacing it.

Saving money is a mind-set and it takes time and effort to get good at it. When the Kulagas are ready to retire, there's a good chance that a shaky economy won't put a knot in their stomachs.'s corrections policy -- Posted: March 25, 2008
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