Financial Literacy - Retirement income planning
Figuring retirement needs in shaky economy

America's retirement picture looks anything but rosy.

Bankrate's recent survey reveals that 70 percent of Americans worry about saving enough money for retirement. And after getting burned in the recent bear market, only half (49 percent) believe stocks and stock funds offer the best chance for good long-term returns.

Even American attitudes about homeownership are mixed. A whopping 92 percent say they believe a home is a good investment for the future, despite ongoing deterioration in the housing market. However, 48 percent of Americans worry they'll lose or be unable to afford the home they live in.

As for pension promises, these seem to be less than solid as companies seek ways to trim costs or file for bankruptcy. Even Social Security doesn't look like a sure thing anymore.

Will we all have to keep working until we drop?

John Spitzer, a former professor of economics at SUNY College at Brockport, N.Y., retired in January 2008, right before the worst of the real estate crisis and only a few months before the financial services meltdown. Just as he was settling into his retirement, he watched his nest egg take a big hit.

"I lost a significant percentage. I don't have a crystal ball, but it could be years before we get back to where we were at the beginning of 2008," Spitzer says.

If you're planning to retire in the next few years, take these steps to see if your nest egg can adequately furnish your needs in best- and worst-case scenarios.

Retirement considerations
  1. What will you do?
  2. Don't panic: Calculate.
  3. Other factors to consider.
  4. Should you delay retirement?

What will you do?

Lee Eisenberg, whose best-selling book "The Number" examines what it takes to live a satisfying retirement, concludes that when planning for retirement, you can run all the calculations in the world, but unless you know what you want to do with your life during your last 20 or 30 years, you'll be "running numbers in the dark."

Or as Eisenberg says, "The question you want to answer is: 'Am I properly invested for what would make me happy?'"

In writing the book, Eisenberg discovered that many people don't give any thought to how they're going to spend their days after retirement, even though the amount of time they have left is probably a lot greater than it was for their parents or grandparents.

At age 65, here are your chances of attaining these landmark birthdays:

Probability of survival to:
Based on Society of Actuaries Retirement Plan - 2000

Eisenberg says that many people he interviewed for his book told him that they wanted to spend their retirement years playing golf or traveling. While these hobbies could be a full-time passion, Eisenberg thinks they aren't enough to sustain most people through 25 or 30 years of remaining life, and they'll need something that will provide more purpose and motivation to get up every morning.

He suggests people identify that meaningful activity by asking themselves, "If I had 24 hours to live, what would I most regret?" They should then use their answer to develop a plan.

Once you have a plan, you can determine whether you have enough money to carry it out.


Don't panic: Calculate

Plenty of scary numbers related to retirement are floating around, but Dr. Bruce Palmer, a retired Georgia State University professor of actuarial science, risk and insurance, says his calculations for Aon Consulting reveal that the lump-sum targets that average families should strive to attain are achievable. 

For several years Palmer has calculated how much money it takes for someone to replace their preretirement income during retirement. He wrote about his most recent findings in "2008 Georgia State University/Aon RETIRE Project Report."

As an example, take an average couple. He's 65 and she's 62 when he retires from a job that paid $80,000 in annual income.

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