The average person spends 18 years in retirement. Planning ahead for these years of decreased income is an important part of ensuring that your retirement is pleasant. Regardless of your current age, consider taking these steps to prepare for retirement’s financial impact.

Know your retirement needs.
Experts estimate that most people will need about 70% of their pre-retirement income (90% or more if they have a lower income) to maintain the same standard of living when they stop working.

Confirm your Social Security benefits.
Social Security pays the average retiree about 40% of preretirement earnings. Call the Social Security Administration at 800-772-1213 or visit to obtain a free Personal Earnings and Benefit Estimate Statement (PEBES). Be certain to examine the statement for any errors in your past earnings.

Learn about your employer’s pension or profit sharing plan.
If your employer offers a plan, check to see what your benefits are worth (most employers will provide an individual benefit statement upon request). Learn what benefits you may have from previous employment or your spouse’s retirement plan. For information on private pension laws, contact the U.S. Department of Labor at 866-4-USA-DOL or visit

Contribute to a tax sheltered savings plan.
If your employer offers a 401(k) or other tax-sheltered savings plan, sign up and contribute all you can. This will decrease your annual taxes and could increase how much your employer contributes in matching funds. If you save $100 a month in a 401(k) between the ages of 25 and 35, experts estimate that by retirement age that amount will have grown to $200,000.

Put money into an Individual Retirement Account (IRA).
An IRA allows you to put money aside for retirement each year (the amount is limited by Federal law and can change from year to year). A traditional IRA defers your taxes until you withdraw the money, while with a Roth IRA you pay the taxes when you invest. If you don’t have a retirement plan or you meet specific income restrictions, you may be able to take a tax deduction for IRA contributions. Visit for more information on the rules governing IRAs.

Consider carefully before accessing your retirement savings.
Under certain circumstances, it is possible to take a loan on your retirement savings before you retire. If you are in a qualifying circumstance (such as the need to pay large medical bills or when you are about to make a down payment on a house), consider carefully before accessing your account. Weigh the cost of paying back the loan (with interest) and the loss to your accumulated earnings against the benefits of the loan (for instance, the potential financial benefits of owning a home may outweigh the loss to your retirement savings). If you change jobs, roll your retirement savings directly into an IRA or your new employer’s retirement plan.

Use basic investment principles.
How you save can be as important as how much you save. Inflation and the type of investments you make play important roles in how much money you will have accumulated by retirement age. Know how your pension or savings plan is invested, and make certain you rebalance your funds regularly. It’s important to invest in higher risk/higher yield funds when younger. As you age, gradually move your savings into lower risk (and lower yield) investments.

Ask questions.
Your benefits department, bank or credit union, and 401(k) advisor are invaluable resources for planning retirement savings. You may also want to consider retaining a financial planner to help you structure a savings plan designed for your specific retirement goals.

Ten Financial Tasks to Complete Before Retirement

1. Review all insurance policies to ensure you are adequately covered.

2. Contact a financial planner for an objective, professional financial review.

3. If you haven’t yet, draw up a will (and a trust, if necessary).

4. Make sure your beneficiaries are your current choices.

5. Repay any consumer debt you might have.

6. Develop a post-retirement budget.

7. Talk with your partner about your post-retirement plans.

8. Understand your Social Security benefits.

9. Switch high risk investments to lower risk investments or accounts.

10. Make a final contribution push to maximize your tax-advantaged savings plans.




How To Retire Happy: Everything You Need to Know About the 12 Most Important Decisions You Must Make Before You Retire
By Stan Hinden (McGraw-Hill)

Though it’s common knowledge that we all need to plan for retirement, many of us are woefully unprepared for our golden years. There are countless books about retirement planning, but award-winning Washington Post financial reporter Stan Hinden’s How To Retire Happy is among the best. How To Retire Happy answers virtually every question you may have concerning what you need to do before you walk away from work for good. Each chapter tackles a common retirement issue, including how to deal effectively with the Social Security Administration, where and how you want to live, how to invest both wisely and safely, health insurance, account distribution rules, and how to save on taxes through estate planning. If this is beginning to sound like every other book on preparing for retirement, think again. Hinden recognizes that retirement is loaded with psychological issues, and discusses them at length. He shares his own experiences and offers sound advice on how to overcome the emotional upset not working can sometimes bring on. After reading How To Retire Happy, you will be not just armed with useful knowledge, but inspired to do what you can to make your later years truly enjoyable.

Content provided by NEAS. Copyright © NEAS, Inc.
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