Guest Column: Complex retirement issues made easy with plan

Because everyone enters retirement with different experiences and expectations, a skilled retirement planner should effectively communicate with clients on key issues. These include the effect of financial well-being on quality of life, personal savings or investments, individual retirement accounts, tax planning, health and long-term care insurance, wealth accumulation and asset allocation, Medicare options and estate planning.

Educating the work force

There is a growing need to educate employees on the importance of saving for retirement.

According to data from the American College, 50 percent of workers at businesses with at least 25 employees and 85 percent of workers at businesses with at least 100 employees have employer-based plans available to them. Unfortunately, 57 percent admitted they have not calculated the savings they need to reach their retirement goals; additionally, six in 10 people who change jobs cash out their retirement savings instead of rolling the money into another plan.

More than 90 percent of human resource and financial managers felt employees were not prepared to make their own informed retirement decisions. Studies show employees can benefit from financial advisement through seminars and other educational opportunities, as it increases participation, contributions and awareness of the importance of protecting their investments.

Women should especially be mindful of saving for retirement because they tend to experience more difficulties in amassing enough money to ensure financial independence. Fewer women tend to maintain jobs that provide pensions, and they frequently earn less, experience higher turnover, live longer than their spouses and are increasingly likely to be caregivers.

An American College study showed that women are overall less confident about having enough money saved to live comfortably in retirement and cover long-term care expenses.

Retirement trends

It is true that the nature and functionality of retirement is changing. Among the changes, more retirees choose to continue working in some manner. In fact, 56 percent of retirees opt to stay involved with their careers. Several factors contribute to this decision. They still enjoy their jobs, they want to keep health benefits or they want the money to spend on luxuries. Some even decide to embark on new careers.

Another change is the role of the retiree as the caregiver to ailing parents, children, spouses or even grandchildren.

There can be many hurdles in preparing for retirement, including unexpected expenses and insufficient insurance coverage.

Perhaps the main obstacle is that many people use all of their after-tax income to support their current standard of living, leaving little or no money to contribute to retirement funds. The recommendation is using a 90-10 spending ratio in which 90 percent of your earnings supports your current living expenses and at least 10 percent is directed into long-term savings.

It is also important to establish retirement objectives. The right time to retire is different for everyone based on factors such as maintaining a certain standard of living, minimizing taxes, passing on wealth and caring for dependents.

Security blankets

So what are the main factors you should consider to prepare for a secure retirement? Social Security, retirement pensions and personal savings are important, but they are not all you should think about.

Consider this: Social Security benefits account for about 40 percent of total income for those 65 and older. Approximately 30 percent of those 65 and older receive employer pensions, but it accounts for only 20 percent of their retirement income. Personal savings are crucial as well, and more than 50 percent of those over 65 have interest income.

The American College provides an excellent analogy using a ladder of retirement security. The steps of the ladder include the three components above, but other significant steps are good advisement, health and long-term care insurance, part-time wages, inheritances and fiscal welfare.

To know if you are on the right path, consult with an expert in each field to see if your current savings plan is adequate for your future lifestyle objectives and goals. Online resources also offer information regarding retirement planning. Credible sites include www.irs.gov, www.ebri.org, www.ssa.gov, www.benefitscheckup.org and www.asec.org.

One thing is certain: You want to enjoy your hard-earned retirement to the fullest and not worry about finances or become a burden to loved ones. Proper planning can help accomplish that goal.

Andrea Croley is co-owner of Croley Insurance and Financial in Springfield. She may be reached at acroley@croleyinsurance.com.[[In-content Ad]]