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18 Aug, 2012

Advice For All Those Nearing Retirement: Live Within Your Means


WASHINGTON, Aug. 15, 2012 /PRNewswire-USNewswire/ — More Americans find themselves less prepared for retirement, using their long-term savings to pay today’s bills, and risking a delayed or financially insecure retirement.

Certified Financial Planner Board of Standards, Inc. (“CFP Board”) Consumer Advocate, Eleanor Blayney, CFP says though that even in the face of economic hardship, it’s not too late to create a plan that supports a fulfilling and financially stable retirement. “Today’s retirement is no longer defined by the moment we file for Social Security, or start taking our required IRA distributions,” says Blayney. “Instead, we must create financial strategies that unfold gradually over a period of time, to financially secure our golden years.”

Planning and saving for retirement is one of 12 steps in CFP Board’s year-long “12 for ’12 Approach to Financial Confidence.” Blayney recommends that pre-retirees consider five keys to help financially prepare for retirement.

  • Plan within your means: Having a specified net worth to reach is not the prerequisite to a secure retirement. Retirement planning is about adjusting your lifestyle to what you already have.  If your retirement balances are flagging, pay attention to your cash flow, and learn to live within your means. The reality is that there are millionaires going broke in retirement, as well as lower-income families living comfortably on their savings and Social Security.
  • Diversify your retirement investments: There is no one product, fund or savings account that will take care of all your retirement planning needs. For example, annuities may generate a steady income, but they don’t provide liquidity for big, unexpected expenses. Target-date funds may take care of portfolio rebalancing, but may not respond well to unexpected market events. Saving only in a 401(k) or IRA gives you great tax advantages while you are accumulating, but does not provide the tax flexibility of an after-tax savings or investment account when you start to withdraw.
  • Expect to continue generating your own income: Retirement planning is not about preparing for a guaranteed, predictable source of income. Fewer companies are offering defined benefit pensions to avoid the high costs and indefinite liabilities of this type of retirement plan. Social Security is only as secure as the political will to keep financing the program’s growing costs. The American retiree is increasingly on his own to generate income for retirement, and for many, this means continuing to work, in some capacity, for some portion of those final years.
  • Embrace cost-sharing: Retirement planning is not just about becoming financially independent. The reality is that most people must plan for dependence on others, including for medical care or financial decision-making. Retirees may need to address a shortfall in savings by exploring housing options that are more cost-effective than living alone or staying in the family home, such as shared or cooperative housing. Research what community resources and services are available to the aging.
  • Consult an expert: Successful retirement depends on many more factors than just the balance in your 401(k). Managing taxes, debt and expenses makes a big difference, as does having enough of the right kind of insurance coverage, choosing the best medical plans for your circumstances, and drawing up estate planning documents. Reach out to a CFP professional who can advise you in each of these areas.

While many financial decision-makers save for retirement, many feel behind on these savings, according to the 2012 Household Financial Planning Survey, conducted by CFP Board and the Consumer Federation of America. And a CFP professional with competence and training in all aspects of financial planning can help you plan for your retirement. With some thoughtful and comprehensive planning by a professional who puts your interests first, you can move into the autumn of your years with a sense of confidence and unfolding possibilities.

In January, CFP Board launched a new initiative called “12 for ’12 Approach to Financial Confidence” where all the components and steps for successful personal financial management are presented, one each month throughout the year including: establishing realistic goals, tax planning, emergency and risk management, investing, retirement, debt management, and estate planning.