Plan while working to enjoy active retirement

Experts in retirement strategies emphasize that people are unlikely to have active, enjoyable retirement years unless they prepare for them while working and that preparation means planning financially, socially, physically and mentally.

The first question to ask when planning an active retirement is how long the retirement will last. People are living much longer now, the federal government says.

The Federal Interagency Forum on Aging-Related Statistics found that in 1900 a baby girl was expected to live to age 51, a boy to age 48; in 1997, the ages have increased to 79 and 74 respectively.

In addition, by 2030 the United States population age 65 and older is expected to double. Of the older population, those 85 and above are the fastest-growing segment. It is an aging boom.

Given these facts, prospective retirees would be do well to plan on living to the proverbial ripe old age.

Financial ease is of course the key goal in planning for active retirement. Social Security alone may not cover a lot of activities, such as, for example, travel. A 24-foot 2001 Winnebago Winnie model recreational vehicle now commonly goes for $48,203, according to the Web site www.rvsearch.com.

Social Security is described by the Social Security Administration (in the publication "The Future of Social Security") as providing a "minimum foundation of protection'."

The maximum Social Security benefit for a worker retiring at age 65 in January 2001 is $1,536 per month, or $18,432 a year.

"Retirement is a lot different now than it was 15 years ago. People are living longer and spending more. When your parents retired, they weren't spending as much as you will in your retirement. If we are going to live to age 100, we need to make sure our money outlives us," said Seth Murray, financial adviser at American Express Financial Advisors.

"One of the big things I like to do is ask people to think about how they are going to triple their income during retirement. Think about what a stamp cost 30 years ago and what it costs today. What will your dollar amount be 30 years from now?" said Murray.

Terry Conner, president and certified financial planner, Wealth Management Inc., advises, "Get a good estimate of what an active retirement might cost." He warns prospective retirees to look beyond what they think they need to just get by. "A lot of times people spend more money in an active retirement than they did during their working years because now they have time to enjoy recreational activities."

Other financial aspects to consider are:

Whether mortgages and other debts will be paid off prior to retirement;

The effect of taxes on retirement income (tax deferred, tax free, taxable incomes); and

How soon to start investing for retirement.

Both Conner and Murray advise clients to create a financial plan and start investing as early as possible.

Murray said, "To beat the system, you have to use some tools: advisers, an estate attorney, and an accountant."

Conner offered the hypothetical example of a 30-year-old couple. By contributing $2,000 each into a Roth IRA invested in a conservative equity fund, the couple would accumulate $3.3 million by age 65.

With a modest 6 percent distribution, the investment would generate $198,000 per year tax free. Adjusting for inflation, that is equivalent to $71,000 per year in today's money.

Financial planners advise being in the right frame of mind for retirement. Before people retire, they should pave the way for a good mental outlook by making sure they're not retiring from something, but to something.

To do this, financial planners advise setting goals. Prospective retirees should write down what they want to achieve during retirement and the activities they'd like to pursue.

Many seniors turn to participation in volunteer programs such as those offered by the Southwest Missouri Office on Aging and other agencies and institutions. (See story on page 14.)

Travel, taking long walks, golfing, fishing, reading, writing, gardening, finding new hobbies, and spending more time with the extended family are only a few of the activities available to retirees.

As Conner put it: "When we are 20 we all feel immortal. In our 30s, we have mortgages and young children and we put off planning. In our 40s, our children are going to college and that's where our money goes. At age 55 is when clients tend to come in and they think they have 10 years until retirement.

"You don't have 10 years. You have 120 paychecks, if you get paid once a month," he said. "You can't eat an elephant in one bite, but you can eat it one bite at a time. The longer you have to accumulate wealth, the more successful you will be."