Voice of the Expert: Planning for retirement starts now

Retirement seemed like a sure bet for so many before the economy went into a tailspin. No matter how great the setback you’ve experienced, there is no need to fold the tent now, said this week’s Voice of the Expert guest blogger, Lee Baker.

Judy and Charlie Dollar are retirees who gave up a bigger home to live in an active adult community. Photo: Frank Niemeir

Whether you’re just entering the workforce or standing at the door of retirement, there are actions you can take to prepare yourself for life after work. Baker, a financial planner at Apex Financial Services in Tucker and a member of the National Board of Directors of the Financial Planning Association, has provided a life-stages guideline to help you through the process.

Baker says:

Mention the word retirement and for many people, different images comes to mind. For some it is sailing around the world, visiting grandchildren, playing golf or perhaps giving time to a favorite charity.  In all, there is a common thread: Freedom. One of the early steps in the retirement preparation process is to have my clients “paint a picture” of their future.  Once we have an idea of what the desired picture looks like, we can begin designing a plan that provides the freedom to live those dreams.  Now let’s spend a little time looking at some common issues on the road to retirement freedom at different life stages.

20s & 30s:

Typically at this age we’re just starting out and the world is our collective oyster.  If you were like me coming out of college, you owned two things –  a lot of time to save but not a lot of money to do it with.  Quite often I think of a quote attributed to Albert Einstein: “The most powerful force in the universe is compound interest.”  This quote is so true.  If you want to achieve retirement freedom at age 65, (let’s assume you can feel free with $1 million after tax) a 25 year old would need to save about $500 per month and earn 8 percent on the investments during that time period.  Waiting until you turn 40 almost triples the required savings.  This is also a time period where you can typically afford to take on a little more risk in your portfolio.  Just be sure to do so wisely.

40s & 50s:

At this life stage many of us are in our peak earning years, but quite often have more responsibilities to handle.  Perhaps, you are concerned about paying private school tuition, saving for college, paying for a wedding or helping provide for elderly parents.  If you haven’t saved much toward retirement freedom, get started.  Now!  A few things to keep in mind here are that you want to get as precise as you can with assessing your financial needs in retirement.  Just how much is it going to take to live the life you want?  Typically, you can still handle some risk in your portfolio. Just don’t go overboard. Keep in mind there may be more expenses in retirement than you currently deal with.  Don’t forget to think about the cost of things like medical insurance, if you currently receive it as an employee benefit.

60s & 70s:

We are either in or on the doorstep of retirement. One of the biggest concerns I hear from clients at this stage is whether they have enough resources to live a life of dignity without being dependent on others.  Here we need to be even more careful with managing our resources.  Now may not be the time for tremendous exposure to assets that are highly volatile.  There is usually room in the portfolio for stocks and the like if for no other reason than to stay ahead of inflation.  Be realistic about returns on investment.  You simply can’t take out 10 percent every year and expect it to last forever.  Current experts suggest that we can only take out about 5 percent to have a high likelihood of not running out of money.

As a society, we are living longer.  In fact, more than half of babies born today are expected to live 100 years. That means that for many of us, we can expect to spend many years in some state of retirement. Making good choices at every stage of life greatly enhances your chances of spending those years living the life you choose.

Have you begun planning for retirement? What adjustments have you made to your plan in the past year? And what does retirement look like for you?

Read other Voice of the Expert guest blogs:

Repair your credit with these 5 steps

Financial planning isn’t just for the wealthy

Eight tips on starting an emergency fund

10 Ways to sell your home faster

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