Start saving now to get early start on retirement

Tony LaJeunesse, FINANCIALLYSOUND
July 20, 2004

"People don't plan to fail, they fail to plan."

Those are words of wisdom I heard when I was growing up, and to be honest, I didn't care much for hearing it.

Probably because it's true to some degree in all of our lives.

Could those words also be true when it comes to your retirement planning?

The days when we could rely on corporate pensions and the government to help support us in our golden years are gone.

Just ask some of the former employees of Great Lakes Steel and Rouge Steel what happened to them.

Today, the responsibility for accumulating a nest egg and ensuring that it supports us throughout retirement has been placed squarely upon our shoulders.

This responsibility can be daunting, but it's also manageable if you approach retirement planning the correct way.

Here are some helpful tips to get you on the right track to retirement:

BEGIN SAVING AS SOON AS YOU CAN

The sooner you begin saving, the more you can accumulate for retirement. Start saving $250 a month ($3,000 a year) at age 30 and you'll have roughly $244,900 at 65 assuming an 8 percent annual return.

Wait until age 40, and you'll have just $90,259 or $154,461 less.

CREATE A PERSONAL RETIREMENT PLAN

According to the American Education Council, Americans who have done a retirement calculation have nearly five times the savings of those who haven't bothered.

MAXIMIZE YOUR 401(k)

While it's not the only investment option available; utilizing full advantage of the tax benefits and employer match in your 401(k) or other employer plan is key to a successful retirement strategy.

Unfortunately, 20 percent of us who are eligible don't sign up for such plans, while many of the rest of us don't contribute the max or understand the investing choices.

That could be a big mistake since the size of our 401(k) can largely determine our lifestyle in retirement.

TAKE ADVANTAGE OF DIVERSIFICATION

In the roaring '90s, investors plowed their retirement savings into hot growth and tech stocks —and then suffered the consequences of taking those risks.

Many investors also put too much into their company stock, like those of Enron.

Don't repeat mistakes of the past. Have a well-diversified approach to your portfolio.

Blending your stocks, mutual funds and bonds can help you thrive in up markets and weather the storms of down markets.

TAKE ADVANTAGE OF OTHER SAVINGS PLANS

Chances are that no one plan alone will allow you to accumulate what you need for retirement.

Which is why you should think in terms of multiple retirement savings plans, including IRAs, Roth IRAs, Simple IRA's and SEP IRA's.

Other items to take into consideration are annuities, tax-free municipal bonds and fixed income vehicles.

INSURE YOUR INCOME RESOURCES

There are many things that can derail your retirement plans. For example, an extended illness, disability, or death can happen at any time.

You can protect yourself and family from the potential loss of income from any of these risks by insuring your life or body from a disability or illness.

The insurance products I have in mind are life insurance, long-term care insurance and disability insurance.

MONITOR YOUR PROGRESS REGULARLY

A retirement plan isn't something you create and put on autopilot. To ensure that you stay on track, you should review your portfolio quarterly and do a thorough review annually to make sure you are staying on course with your plan.

This can help you re-assess your investing strategy as market conditions change, re-evaluate your savings effort — and make adjustments as necessary.

SEEK ADVICE

Having an investment adviser or planner can help you achieve the goals you're looking to accomplish.

A survey by Harris Interactive Survey Co. found that the most successful retirees have developed a financial plan to help them get where they are today and had a financial coach to help them.

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