It’s crunch time! There’s no way around it. The result of a lifetime of money habits will make itself abundantly clear. Your financial future depends now on a candid assessment of how well you’ve stuck to planning thus far.

If you’re among the roughly six out of 10 individuals who has never tried to calculate what they need in retirement, do it pronto. That figure is like a destination on a map, giving you direction as you save, invest and create your overall financial plan. If you set a retirement savings goal, but you’ve forgotten about it, it’s time to dust it off for a careful review. “You should be looking at your plan periodically, at least every three years,” says Dick Bellmer, president of National Association of Personal Financial Advisors.

Kick off retirement savings
  1. Set realistic goals.
  2. Call in the experts.
  3. Take advantage of catch-up contributions.
  4. Time your exit.
  5. Tackle debt.
  6. Prepare for the unexpected.

1. Set realistic goals

First item for consideration: Your savings and investments thus far. Hopefully, you’ve been stashing funds away consistently, making maximum contributions to things like 401(k) plans and IRAs, as well as other accounts. These days, individuals 55 and older are on track to replace roughly 55 percent of their income during retirement with personal savings, Social Security and pension income, according to a recent study by the Fidelity Research Institute. That means they’ll have to live on 45 percent less cash each month once they retire.

How much is enough? That depends on your lifestyle and expenses, potential medical bills and the kind of support you’ll have from, say, a pension plan and Social Security. But, as you review your savings goals, be careful not to set the bar too low. Thirty-nine percent of current retirees say they underestimated their spending, and expenses increased in retirement rather than going down, according to Fidelity Research. To find the amount you want to have set aside, read “5 steps for figuring out your ‘big number’.”

“People typically don’t downsize,” says Harold Evensky, a Certified Financial Planner in Coral Gables, Fla. “It’s not uncommon for them to spend more in retirement than less.”

Use catch-up contributions to maximize retirement savings

Use catch-up contributions to maximize retirement savings.

2. Call in the experts

With that in mind, it may be a good idea to seek a little professional guidance to ensure you’re setting realistic goals. When asked in a recent poll by Employee Benefits Research Institute what was the most helpful thing they did to save, most respondents said it was hiring a financial adviser.

Ray Ringston, 79, says that hiring his financial adviser was one of the best moves he’s made. “I’ve never been interested in the money game,” says Ringston, who calls the prospect of managing investments “boring.”

Instead, Ringston hired an independent investment adviser to do the job. “He’s done exceptionally well and I believe he’s trustworthy. If I had to do it over again, I would have tried to find someone in my 40s.”

3. Take advantage of catch-up contributions

One of the first things a pro will encourage you to do is to keep saving. If you’re still working and over 50, there are ways to catch up. You can begin putting more money into tax-sheltered retirement accounts such as 401(k)s and IRAs. This year, individuals age 50 or older can save up to $20,500 in a 401(k) and up to $5,000 in an IRA.

Take advantage of these opportunities. “It’s not hopeless!” says Dee Lee, a Certified Financial Planner and author of “Women & Money.”

To illustrate, Lee describes a couple that decides to tighten their financial belts. If each contributes $10,000 a year to a 401(k) plan, they’ll have about $90,000 each after 7 years, assuming the money grows by 7 percent a year.

Now for the caveat: In order to earn that 7 percent, you’ve got to be willing to take on some risk. Historically, stocks have earned just over 10 percent a year, while bonds have clipped along at roughly 5 percent. If you’re unwilling to invest in stocks, you may well wind up short of your goals.

“The question besides ‘What do you need?’ is ‘What is your risk preference?’ “says Bellmer. “It doesn’t matter that you might need a 10 percent rate of return. You might not be able to handle the risk associated with that.”

Nevertheless, bold or not, planners will say most people in their 50s are too young to flee to the safety of cash instruments. “This is not the time when you go to cash,” says Ellen Rinaldi, executive director of investment counseling and research at mutual fund group Vanguard. “You may stay 50-50 in stocks and bonds. But you’re going to need growth in your portfolio.”

4. Time your exit

Savings and investments alone may not be enough to adequately fund your retirement. Planning also means making some vital life decisions, too.

You may want, or need, to delay retirement. If so, you’ll have plenty of company. These days many workers are opting to “downshift” into retirement by working part-time or longer than they’d originally planned. A study from Putnam Investments found that 7 million retirees returned to work within 18 months. Among those, 32 percent said financial reasons prompted their decisions. And close to four out of 10 who went back said that if they could do it differently, they would have saved more in their company retirement plan.

On the upside, those who do return to work generally take advantage of their chance to catch up or get ahead. For example, they save 11 percent of their income on average. And their household incomes average $86,600, far higher than the typical $54,200 annual income for nonworking retirees, Putnam found.

There are other advantages, like intellectual and social stimulation, that prompt many to keep working. That’s something Ray Ringston understands.

“If I had my way I’d still be working,” says Ringston, a former vice president of marketing and sales for a toy company, who retired in 1991. “I’d rather be with interesting people on an eight- to 10-hour day. I worked very hard in my life. It was fun and I made good money. There was the travel and the people were bright and creative and stimulating.”

Ringston’s wife, Pat, still works four days a week as a dental hygienist. He says she likes the people but finances, not social life, have motivated her to keep working. “She’d rather be home, but the pay is very good.” Ray says she probably could quit work if the cost of living wasn’t so high in Fairfield County, Conn., where they live.

Delaying retirement doesn’t just impact earnings. It also affects Social Security benefits, which are based both on your earnings and age you start tapping into them. If you were born by 1938, you qualified for full benefits by age 65. But individuals born after then will have to wait longer — up to age 67 for those born after 1960. If you draw benefits earlier, you’ll see reduced benefits over your entire lifetime.

Meanwhile, other retirement funds, such as a 401(k), IRA and Roth IRA, generally make you wait until age 59½ before you can cash out. If you jump the gun, you’ll usually owe a 10 percent early withdrawal penalty.

One bright spot: You may find it easier to find work, or stay at your current job, as you get older. Instead of pushing older employees out the door, many companies are finding that they need to retain experienced individuals to fill staffing gaps, says Tim Driver, CEO of

“It’s a supply-and-demand issue,” says Driver. “There’s a much lower supply of younger people coming into work. Then, because of longevity, there’s a whole new need for people to work longer. People find they didn’t save enough. Work is a fundamental and new part of retirement.”

5. Tackle debt

Part of the equation when you quit work is lingering debt. By the time you’re 50 there are two big hurdles you may have left to clear: your mortgage and your own parents

Once, mortgage-burning parties were common, a fun way to celebrate the achievement of owning your home free and clear. But that rite of passage is becoming less common. Now nearly six out of 10 homeowners between the ages of 55 to 64 still owe on a mortgage, according to Harvard University’s Joint Center for Housing Studies.

There are arguments both for and against paying off your mortgage as quickly as possible. You may well be able to earn more plowing money into the stock market. That, of course, is the argument made on paper. In real life, most retirees find it too difficult to quit and keep paying for their home. One analysis by Putnam Investments found that retirees who ended up going back to work had just 47 percent equity in their homes on average.

“It comes down to whether you look at your home as a home or an investment vehicle,” says Vanguard’s Rinaldi. “But going into retirement with a large mortgage is not the best situation.”

6. Prepare for the unexpected

Safeguard your finances against unexpected medical costs, even if you’re certain you’ll be insured as a retiree. Many companies are scaling back lifetime health coverage for former employees. This year, 10 percent of companies expect to eliminate subsidized medical coverage for employees who would have been eligible, according to a 2006 study by insurer Kaiser Permanente.

That leaves you vulnerable to some hefty medical bills that can quickly eat up a lifetime of savings. A couple in their mid-60s will spend $215,000 out-of-pocket for prescriptions over their lifetime until age 84, according to one estimate by Fidelity Research. Then there’s the stratospheric cost of extended care at nursing homes. It currently averages $74,445 per year and is rising, according to a study by New York Life. With that in mind, retirement planning must include some consideration of future medical costs.

One option is long-term health insurance, which pays for extended medical care including such things as nursing and assisted living. The downside is expense. Standard plans now run $1,985 a month and can be much more than that, depending on policy features. “It has to be easily affordable not just for today, but for whole premium period,” says Marilee Driscoll, founder of Long-Term Care Planning Month, a public-awareness effort each October.

If you do want to buy, don’t wait too long. Ray and Pat Ringston decided long-term care insurance was too pricey. But they did safeguard against health-care costs by purchasing an insurance policy that supplements their Medicare benefits with extra prescription drug coverage. “If I went to the pharmacy, instead of paying $40 I’d pay $5,” says Ray Ringston.

“Retirement is like a two-edge sword,” he says. On one hand, Ringston says, you’re looking over your shoulder, concerned that something drastic could happen to you or to your partner, and you could be financially wiped out as a result. But, you’re also enjoying the freedom of doing what you want.

Are you worried about having enough money to retire someday? Or, do you have a plan of action? Share your story

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