Planning for Retirement

Most of us are so busy these days that the thought of retirement - of enjoying long stretches of time we can call our own - seems like an impossible dream. But it isn't! As the song says, we can "reach the unreachable star" with just a little planning.

To be sure, getting to the so-called "golden years" has its challenges. We need to know how much to save and how much income we will need during retirement. This isn't easy and there is lots of disagreement about how to make the calculations. One approach that can be useful is to set a target for your annual retirement income that is at least 70 percent of your pre-retirement annual income. For example, if you made $50,000 a year before retirement you would want to have an annual retirement stipend of at least $50,000 X 70% = $35,000. This level of annual retirement income might be achieved through a combination of your own personal pension plan (including Keoghs and IRAs), Social Security income, and private savings and perhaps some work on the side. By spreading risk, you stand a much greater chance of achieving your goals and less of a chance of being hurt by inflation.

Remember that inflation can be a real thief that robs you of the full enjoyment of your retirement years. For example, if inflation in the prices of goods and services you buy is 3% a year, then after five years the purchasing power of your $35,000 income has dropped to only $30,191. Clearly, without something on your side to offset inflation, you can become poorer as time goes on. How do you fight back against inflation? Smart shopping, personal savings, and outside income (such as a part-time job) can really help. You'll want to consider placing some of your savings in inflation-hedged assets (such as quality stocks and well-positioned real estate) whose value may increase with inflation.

More jobs are available at home using a computer, fax machine, and telephone. Maybe some of these part-time jobs could work for you, though be sure to check out each carefully (e.g., checking with your local Better Business Bureau and with others who have done the same job). Unfortunately, there are plenty of scams afoot in the home employment market, so investigate first.

Remember that planning for an enjoyable retirement involves more than just finances. A number of studies of people who have lived long lives find common elements in their personal histories. They stay as busy as their health permits through part-time work or volunteering, and enjoying the satisfaction of making a contribution towards a better life for everyone. If health permits, regular exercise and the companionship of a pet can lead to lower blood pressure and a positive outlook. Travel and a rewarding hobby frequently round out the life style of a happy retiree.

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