Living

Fiscal education

Whether your retirement is 20 years in the future or just around the corner, these tips will help ensure your bank account matches your planned lifestyle.

By HELEN HUNTLEY
Published April 24, 2007

---

ADVERTISEMENT

Yes, you will be able to retire. The dreary statistics you hear bandied about don't mean that you'll be chained to your desk until you are 90.

But they may mean the retirement you can afford is not the one you have in mind.

The reality is that most of us will not be able to count on a pension. Whatever money we have to supplement our Social Security checks will depend on what we have saved and how we have invested while we were working.

But no matter what your age, if you are earning money, there are things you can do to improve your chances for a comfortable retirement. Here are tips on how to save, depending on your age. And turning the page, you'll find examples of how the Tampa Bay area residents pictured here are working for their retirement savings.

Your 40s

"It's easier and less painful the sooner you start," advises Gregory Rosica, a partner with Ernst & Young in Tampa.

That's because your investments have more time to grow, putting the power of compounding to work in your favor. The younger you are when you start saving for retirement, the less you need to save each year to reach your goal.

The problem, of course, is that younger people typically have big competing goals, such as saving for a home or college, and big demands on their income.

"I have a 13-year-old and a 23-year-old I thought was gone but who came back, and then I have my 86-year-old mom - and they all live with me," said Debra Curry, 46.

A single mom living in St. Petersburg, she is in the middle of the classic generational sandwich.

She works two jobs, full time as a project coordinator at an architectural firm and part time as a social worker. Her goals include paying off debt and sending her younger daughter to college.

But Curry is mindful about the need to save for retirement. She faithfully puts 3 percent of her pay into her 401(k) retirement savings plan, enough to earn her employer's matching contribution.

"I've vowed that when I get a raise, I'm going to put the extra into savings, too," she said.

That kind of determination goes a long way to laying the foundation for financial success.

Your 50s 

Like many people, Mike Della Penna got a late start saving for retirement. Standing in his way was $70,000 of credit card debt. But he and his wife, Brenda, paid it off over 6 1/2 years. He also had child-support obligations for his three older children.

"There were times when it was tough, but we got through it," he said. Now, like many late starters in their 50s, they have ramped up their savings.

They have money deducted from their checking account each month for investments, and they pay extra on the mortgage on their Land O'Lakes home, aiming to have it paid off in seven years - before he retires.

They avoid incurring new debt.

Della Penna, a flooring contractor, says being self-employed creates special challenges. "Any time you're in business for yourself, you have good weeks and bad weeks (for income), and you have to discipline yourself," he said.

But Della Penna, who turns 52 next month, says it's unrealistic to think he could retire any time soon.

"We'll keep plugging along the way we're going and see how things are 15 years from now," he said. Besides, he said, he's seen that retiring too early can be a mistake: "My dad lived to the age of 89. He was retired for 32 years and he outlived his money."

Your 60s 

What if you have already reached the cusp of retirement and your savings are puny?

"The two trump cards people have are housing - to the extent they own a home and have the ability to tap into that equity - and delaying retirement," said Jonathan Pond, author of You Can Do It! The Boomer's Guide to a Great Retirement.

Each additional year of working means one less year to finance your life from savings. In addition, Social Security benefits increase every year you delay retirement.

For a personal analysis of the benefits of waiting on Social Security benefits, go to www.analyzenow.com and download the free program. You will need the information from your most recent Social Security benefit statement.

Part-time work is another way to give retirement income a boost. Tom Proctor plans to keep umpiring baseball games when he retires in two years. That's when he'll also give up the 35-mile commute between his home in Odessa and his teaching and administrative job at St. Petersburg High School.

"I'm 60, but I don't feel like it or act like it," he said. "We have relatives in Maine and I'll be able to (umpire) summer ball in Maine for about three months and baseball down here the rest of the time."

He said he and his wife, Betsy, also will pick up a little money by administering college entrance exams.

But that won't be their main source of income. They will have the pension from Proctor's teaching career plus a nest egg that includes more than a year's worth of accumulated sick pay, a payout from the Florida Retirement System's deferred retirement program, and their savings.

It also helps that he's not expecting to spend big in retirement.

"I'm frugal," he said. "If you spend less than you earn, you're going to make it."

In fact, matching future income to future spending is what retirement planning is all about. Just don't forget that the expense side will rise with inflation, so the income side will have to adjust to meet it.

Social Security and some pensions do automatically adjust for inflation. But if you're relying heavily on your savings in order to finance your retirement, you'll need investments that grow and a carefully planned withdrawal rate of your savings.

Working up a detailed financial plan is a big help; ideally you should do this at least two or three years before your intended retirement date.

Helen Huntley can be reached at (727) 893-8230 or hhuntley@sptimes.com.

[Last modified April 24, 2007, 07:01:04]

[an error occurred while processing this directive]