9 tips to help you prepare for retirement


Feb. 4, 2012 at midnight
Updated Feb. 4, 2012 at 8:05 p.m.

Whether you're just entering the workforce or joined AARP years ago, chances are retirement has at least crossed your mind on occasion.

But how much should you save, and where do you begin?

The answers vary from person to person, but a few key tips can help. Here, some local experts weigh in:

Go in with a plan.

Know how long you plan to live in retirement, what your income sources and expected expenses will be and how much you have saved. Remember a person generally lives off of 80 percent of their pre-retirement income once they stop working.

Start early.

The earlier you start, the less money you have to put in each month to reach your goal. A person who began saving at age 22 and puts $4,000 into a Roth IRA - assuming that IRA gets 8 percent - would have $1 million by age 62. A person who began saving at age 32 would have to put more than two times as much in to reach that same amount.

Avoid debt to the extent possible.

Pay with cash when you can and remember your main debt should be your home mortgage. Keep away from credit card debt if possible, but, if you do have cards, pay them off at month's end. It helps keep you from accumulating balances.

Maintain an emergency fund, just in case.

Income needs can change from year to year, and it's possible the amount you need to withdraw annually will also change. Keep cash reserves on hand.

Look over your investment portfolio once a year with a professional.

This allows you to know how well your investments are doing and offers insight as to what you should hold onto and what, if anything, you should reconsider. Many places offer such financial advice for free.

Factor in inflation.

Inflation can really eat into spending power, especially for those who plan to spend 20 years or more in retirement. A 1-pound bag of Oreos cost, on nationwide average, $2.39 a pound in 1991, according to EconLife.com. In 2011, a 16.6-oz. bag cost an average $4.29.

Get a will if you don't already have one.

This especially applies to those with spouses or children. A will can help you avoid heartache and difficulty when the unexpected happens. On average, it costs between $250 and $500 to write up the documents. Don't forget to review your beneficiaries and will information annually.

Maintain an appropriate amount of health insurance.

A large medical bill can really jeopardize savings. If you're retiring early, see if you can either stay on your employer's plan or obtain insurance through a spouse. If neither option works, consider private insurance until you can apply for Medicare.

Remember Social Security might not always be around.

It's uncertain whether that additional assistance will be available down the road, especially for those younger than 50. Take it upon yourself to be prepared with Roth IRAs and 401(k) plans. It's up to you to save so you can reach your goals.

Sources: Greg Hermes, certified financial planner with KMH Wealth Management, LLC and Michele Rohde, financial adviser with Edward Jones



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