Looking Ahead: Have It When You Need It

Many of us look forward to retirement. We can hardly wait for the time to put down our tools and change our daily routine. In spite of this desire, many Americans do not plan for retirement until just before they stop working. By then, it is often too late.

You can expect to live 15 to 20 years after age 65. To make sure that these retirement years are filled with leisure and contentment you have to set aside money and make investments to insure that there is a sufficient flow of income to cover living expenses and other activities.

A vast majority of people continue to rely primarily on receiving Social Security and pension benefits for retirement income. To the contrary, we should look at Social Security and pension benefits as supplements to our individual retirement fund, which is self controlled and not subject to the whims of politicians or corporate pension managers. Even though the Federal government, under current tax laws, gives most taxpayers a full tax deduction for any money put into an Individual Retirement Account (IRA) or employer defined contribution plan, commonly called 401(k) plan, as an incentive to save for retirement, many people are unconvinced that this is a way to go or fail to hear the signal that the Federal government is giving. They may find themselves "short" if we don't look ahead. Keep in mind, the last thing you need when you retire is to outlive your income.

Today, we have to be more concerned with planning for our retirement years than ever before. The high cost of living and continuous decreases in the value of money that we work for compel us to be careful with each dollar. The adequacy of your retirement financial resources will depend on the wisdom of your financial planning and management during your working lifetime.

Traditional family relationships, as we used to know them, as not so dominant as they used to be. Today, in addition to the traditional family of four, we have single mothers and single fathers as well as blended families. The retirement plans and investment program must be tailored to meet the needs of these families.

Retirement planning consists of two components. They are the accumulation and decumulation stages. The accumulation stage begins at the time of initial employment through pre-retirement. Funds are consistently accumulated in a retirement account until retirement. After retirement funds are withdrawn from the account(s), which represents the decumulation stage. The goal should be to receive four checks during retirement rather than one. You should receive a check from your employer's retirement account, e.g. 401(k); Individual Retirement Account (Traditional or Roth); non-retirement savings/investment accounts; and Social Security.

If you are near retirement it is not too late to shift your financial planning and money management into retirement gear in order to maximize the income and assets you have accumulated. As a point of reference, however, you should begin planning your financial resources at the beginning of your employment and not later than least 10 years prior to retirement. Since the average monthly Social Security benefit received by individuals who are 65 and older is only $1,170.00, a word to the wise would be to limit Social Security to no more than one-third of your retirement nest egg.

Theodore R. Daniels is the Founder and President of the Society for Financial Education and Professional Development, Inc. (SFEPD). Founded in 1998, SFEPD is a non-profit organization whose mission is to enhance the level of financial and economic literacy of individuals and households in the United States and to promote professional development at the early stages of career development through mid-level management.