How Retirement Expectations Differ From Reality

Good Day,

We all have this vision of the prefect retirement, where life will be one big fiesta, OH! you can’t wait for that day. Then, we go ahead and make plans on how to achieve the ‘perfect vision’ we have in our mind, Ok, the planning bit is very commendable on your part, but the problem comes in when we fail to separate fact from ‘fiction.’ The reason most retirees, after making the big change, often get disappointed when things don’t go as they had planned, is often due to unrealistic expectations about their future, and when in retirement, the world around them seems to be falling apart when reality checks-in. To avoid being in this situation, ensure that when coming up with your retirement plan, keep is as realistic as possible, and as Emily Brandon points out in the following article, current workers are placing too much expectations concerning their retirement.

Current workers who are planning for retirement often envision retirement as something very different from what current retirees are actually experiencing. A recent BlackRock and Boston Research Group poll of 1,002 workers with retirement accounts at work and 1,035 retirees who previously participated in a 401(k) or similar type of retirement plan found that workers are expecting to pay for and experience retirement in a way that contrasts with the lifestyle of current retirees. Here’s a look at how current workers are planning to remake retirement:

Aiming for a later retirement age.

Many current workers plan to stay on the job until their mid or late 60s. Some 48 percent of workers think they will retire at age 64 or later. Another 17 percent of workers surveyed think they will never retire due to their finances or personal preferences. “They are much less confident of their ability to actually amass the dollars they need to retire,” says Warren Cormier, president of Boston Research Group. “I don’t know if its pessimism or realism. They are not as far along in the path toward retirement as they had hoped.” Only 19 percent of current retirees were able and willing to work until age 64 or later. Job loss, health problems, or family circumstances often push people into retirement ahead of schedule. While only 11 percent of current workers plan to retire before age 60, 42 percent of current retirees left their jobs before reaching their 60s.

Planning on working in retirement.

Only 15 percent of current workers envision a retirement that involves not working at all. Most workers would like their retirement to include volunteer work (36 percent), paid employment even though they won’t need the money (34 percent), or working out of necessity (15 percent). “Working a few more years really lessens the amount you will need in retirement,” says Chip Castille, head of BlackRock’s U.S. and Canada Defined Contribution Group. “As we move into a retirement system that relies more on defined-contribution than defined-benefit plans, people are realizing they may need to work a little bit longer.” Most of the retirees surveyed (86 percent) don’t receive any income from employment. And planning to work in retirement doesn’t mean you will be able to find a job or will still want to work or be able to work in your late 60s.

Depending on a 401(k) to fund retirement.

Almost half of workers (48 percent) expect their 401(k) or 403(b) plan to be their largest source of monthly income in retirement. Most workers (75 percent) expect to begin drawing down their 401(k) at age 65 or later. But only 15 percent of retirees get 25 percent or more of their retirement income from their 401(k) and similar types of savings and investment accounts, even though all the retirees in the survey participated in a retirement account while they were working. “The current retirees take a vast portion of their income from secure income sources such as Social Security and legacy defined-benefit plans and they are secure in their concept of receiving Social Security,” says Cormier. “People who are actively working today don’t have a defined-benefit plan available to them. The only thing they have left to expect is a defined-contribution plan. It’s a completely different mix of what is available to them to pay expenses in retirement.” The more retirement income sources you have, the better protected you will be if something goes wrong with any one of them.

Saving for a shorter period of retirement.

Most workers (61 percent) think their savings or investments will need to last for between 20 and 29 years. Only a quarter of the employees surveyed think their retirement savings and investments will need to last for 30 or more years. But what if you end up living until 100? Most retirees (52 percent) think their savings needs to last for 30 or more years after retirement. “Current workers tend to underestimate how long they are going to live and retirees have a better idea,” says Castille. “Retirees have actually gone through the exercise of creating a budget.”


You’ve retired! Now put your plan to the test

Good Day,

You’ve done all that is required for one to have a successful retirement, and the time has now come for you to enjoy the fruits of your labor. Time and time again, retirees have been known to go overboard with their spending plans, and most end up messing up what was once a good plan. As you put your retirement plan to the test, it is always advisable to remember that even during retirement, you’ll still need to plan to ensure the worst case scenario doesn’t happen to you, that is, running out of money during retirement. So, as you put your retirement plan to the test, ensure that you that you observe the following points as advised by Donna Rosato and Susie Poppick in the following article.

Throughout retirement, check your financial plan and your spending periodically.

Welcome to your first year of retirement. You made it! Hard work and diligent saving have paid off. Your financial plan should practically run itself at this point. Still, aim to check in periodically.

What to do

Don’t go chasing yield.

As you age, the fixed-income portion of your portfolio becomes more important. The goal isn’t maximum income, but maximum preservation — by way of diversification. So put the majority of these holdings into a total bond market index fund. For inflation protection, add TIPS, keeping them to less than 30% of your bond share.

Anyone who has substantial money outside tax-deferred accounts and is in a high tax bracket should consider munis too. Initially, you’ll also keep 12 months of expenses, plus your emergency fund, in cash.

Every couple of years, trim a few percentage points from your stockholdings and stick the money in bonds and cash. By 75, you should have two to three years’ expenses in a money-market or short-term bond fund.

“At that point, you don’t need as much growth to keep up with inflation,” says Greg Carroll, managing partner at Sterling Wealth Management in Carlsbad, Calif.

Do a yearly spending checkup.

Before you quit working, you gave yourself a budget. Expect to blow it.

“Retiring is like going on a long vacation, and you always spend more on vacation,” says wealth adviser Jeff Townsend. Besides, your costs of living will naturally vary, as will your portfolio’s value.

Townsend suggests tracking your spending once annually to keep yourself honest. Go back to the budget worksheet on Fidelity’s Retirement Income Planner. Then plug-in your assets to see if your spending is sustainable.

Chronically going over a 4% inflation-adjusted draw could cause your money to run out, but even if you’ve gone off the rails in a few years, dialing back can make a difference.

Take from all baskets.

As you spend down your cash account, you’ll need to replenish it. Minimizing the taxes you incur on portfolio withdrawals will maximize the life span of your savings.

Generally, retirees have been advised to tap taxable assets first, because the long-term capital gains rate on them is lower than the income tax rate owed on traditional 401(k) and IRA withdrawals, and because this method allows tax-deferred accounts to continue to grow without a tax bite. Whether or not the strategy works, however, depends on many variables.

Another failing: Once you do transition to drawing solely on tax-deferred accounts, you may be bumped into a higher tax bracket, says Colorado Springs financial planner and CPA Allan Roth. Not to mention that “all this becomes even more complicated with possible tax-rate changes for 2013,” says Roth.

While there’s no one perfect system, Roth suggests being more egalitarian with your drawdown. Start by balancing any tax deductions you have with withdrawals from tax-deferred accounts, then take the rest of the money you need from taxable accounts.

Never retire your resume.

Keep in mind that a worst-case scenario may necessitate your returning to work. Submitting a CV that hasn’t been dusted off since Y2K won’t do you any favors.

So update your résumé now while recent accomplishments are fresh in your mind, says New York City executive recruiter Steve Viscusi. Then revisit it once a year to add something, even if it’s volunteer work or leadership in a social club.

5 years from retirement? Do this now

Countdown to retirement: 10 years to go

Good Day,

Whenever we talk about retirement, most of us have this vision in our head of something that will happen in the distant future. But before we know it, retirement is knocking at your door and you realize that your retirement portfolio will not be enough to cater even the first ten years of your retirement. Some experts are of the opinion that for you to have a successful retirement, you must start preparing for D-day 10 years before the actual date. I know, it sounds like we are exaggerating things a little bit, but come to think of it, you are about to embark on journey that is totally different from what you have been doing for the last 30 years of your life. So, believe me, you’ll need all that time to adjust yourself, and as Donna Rosato and Carla Fried point out in the following article, there are certain decisions that you’ll have to make as you countdown to retirement.

Figure out the big picture. If you’re saving enough for retirement, position your portfolio for growth.

NEW YORK (Money Magazine) — Congratulations! After 30-plus years of working and socking away savings, you can finally see retirement on the horizon. But it’s not time to coast just yet.

The actions you take in the final decade before you quit working are crucial to getting the next phase off to a smooth start.

“This is the time to evaluate your progress, make adjustments, and take steps to make your retirement a success,” says Jeff Townsend, a Westminster, Colo., wealth manager and the author of “The Road to Retirement.”

From claiming Social Security to managing health care costs to deciding on a place to live, you’ll come away knowing exactly what you need to do to shore up your plan.


Figuring out the big picture

Align your compass with your destination. See if you’re saving enough, position your portfolio for growth, coordinate with your spouse, and keep yourself indispensable at the office.

What to do

Behind? Decide how to catch up. Even if you haven’t put away that seven-times-salary figure savings target, you can still make it to the finish line with what you need (12 times your pay at 65).

Your choice: Seriously power-save, or work a bit longer while saving a lot less, says Denver investment adviser Charles Farrell, author of “Your Money Ratios.”

Say you have five times your income; you could sock away 33% a year, or delay retirement 24 months while banking 20%. Either way, don’t miss out on catch-up contributions! Those 50-plus can put $5,500 extra in a 401(k), $1,000 more in an IRA in 2012.

Unsync with your spouse. Among two-income couples, nearly one in five retires in the same year, and another 30% within two years of each other, reports the Urban Institute.

But quitting in tandem isn’t necessarily the best move, says Tim Golas, a wealth manager in Avon, Conn.

For a 62-year-old couple, there’s a 62% chance the woman will outlive her husband — and the average length of widowhood is 12 years, per the Center for Retirement Research at Boston College. That’s for spouses the same age; on average, married men nearing retirement are almost four years older than their wives, the Urban Institute found.

“If one spouse works just a few years longer, you can draw less from your portfolio in those initial years,” says Golas. And that improves the chances the survivor will have assets to draw from.

Don’t quit on stocks — unless you really can. To achieve returns to sustain a 30-year retirement, you need to still be investing for growth. Stocks should make up 50% to 60% of your allocation, with the rest in bonds, says Rick Ferri, founder of Troy, Mich., Portfolio Solutions.

The caveat: Those within 10% of their ultimate savings goal can choose to dial back to 40%, he adds.

Keep the mortgage, maybe. Of course you don’t want to carry credit card debt into retirement, but what about the mortgage?

The old advice was to burn it before you left work, but in today’s low-rate environment, maybe not. Assuming that your rate is less than 5% and that you’ll be able to afford the payments from guaranteed-income sources in retirement — or, if you’re planning to move — there’s no rush, says San Diego financial planner Saleah Hewitt. You may do better by investing money you would have put toward the loan.

On the other hand, if you won’t be able to swing the nut later on, or simply want peace of mind, use the repayment calculator at to figure out how to erase the debt sooner.

Or consider a cash-in refi to a shorter-term loan. Say you have $200,000 and 20 years left on a 30-year mortgage at 5%. Refinancing to a 15-year at 3%, and putting in $50,000 would shave off five years and cut the monthly payment from $1,381 to $1,074. Keep up the original payment, and the loan will be paid off in 11 years, and you’ll save $10,300 in interest.

Manage down. Sure, you still want to dazzle your boss, but you’d better be working just as hard to make allies below you.

These young’uns are likely to move up the ranks over the next 10 years and have a say in whether you stay or go, notes New York executive recruiter Steve Viscusi. Hanging onto your job for the next decade will be essential to keeping your plan on track.

So train subordinates, mentor up-and-comers, even sign up for reverse mentorships (in which a junior person trains you on something new).


While you can claim Social Security as early as age 62, your payment will increase by about 6% a year for every year you delay filing before your full retirement age (between 66 and 67 for most folks).

After that, holding off earns you another 8% a year until age 70. Altogether, for someone whose full retirement age is 66, the payment is 76% higher at 70 than at 62.

“With very few exceptions, you’re nuts to claim at 62,” says Evanston, Ill., financial planner Danielle Schultz.

That said, postponing may require you to rejigger your plans. So begin strategizing now. Start by determining what you’re entitled to, at, then consider the tactics here for putting off your benefit.

You may also want to use certain software — Maximize My Social Security ($40; or Social Security Solutions ($20 to $50; — to run scenarios using your and your spouse’s ages, earning histories, and savings.

What to do

Stay on the job. If your portfolio won’t generate enough income to let you delay to 70, putting off your quit date can help, as you can build your savings and postpone drawing from them. Or, work part-time from 62 to 70 to replace the benefit you’d have received, says Jim Blankenship, author of “A Social Security Owner’s Manual.” (The max benefit for a 62-year-old this year is less than $2,000 a month.)

Benefit from your spouse. You have the option to collect payment on your spouse’s benefit instead of your own — assuming you are at least 62 and your better half has filed for benefits. The maximum is 50% of your partner’s payout; you must be at full retirement age to get it.

Best move: The spouse with the higher benefit should postpone collecting until 70, to maximize the bigger payout and possibly lock in a greater benefit for the other, says Baylor University professor William Reichenstein. And in the meantime…

…if you each paid into Social Security.The lower earner can claim his or her benefit as early as 62. The higher earner can claim 50% of that at full retirement age, then at 70 switch to his or her own benefit. The low earner’s check will be recalculated if the spousal benefit is greater.

…if only one of you earned a benefit. That person should file at full retirement age — allowing the non-earner to claim a reduced spousal benefit — then suspend his or her own payouts until age 70.

6 Ways to Screw Up Your Retirement Plan

Good Day,

Research shows that a sizeable number of Americans do not have enough funds to cater for their retirement needs, and even surprisingly, is that in this group, are employed individuals who have access or can take part-in-the company-sponsored retirement plans. Ok, I admit times are hard and this has called for some serious cost cutting, but sometimes, in the name of cost cutting, we end doing more harm than good. If you think that Social Security income will be enough to sustain your lifestyle, think again. As things stand right now, Social Security is supposed to supplement your income, not be your only income stream. This is just one of the ways people screw their retirement plan, and as Marilyn Bowden points out in the following article, there are six ways people normally mess their retirement plan.

Contributing to an employer-sponsored retirement plan is an important step toward a secure future, but experts warn that, like any other financial asset, it takes oversight as well as common sense to reap its benefits.

Avoid these six critical mistakes to improve your chances of having a successful retirement.

Mistake No. 1: opting out

One of the biggest mistakes is to decide not to participate, says Robert Gordon, senior financial adviser at Miami-based Investor Solutions.

“As the saying goes, ‘you’ve got to be in it to win it,'” he says. “Be it a 401(k), 403(b), 457 or other similarly numbered options, the responsibility is on the employee to take the initiative and complete the paperwork.”

In an attempt to encourage more people to take advantage of employer-sponsored retirement plans, the 2006 Pension Protection Act provides safe harbor to companies who offer automatic enrollment that requires employees to opt out rather than opt in, says CFP Artie Green, a professional investment adviser at PWJohnson Wealth Management in Sunnyvale, Calif.

“That has not taken hold to the degree the government was hoping,” says Glenn A. Hottin, a CFP at M&H Advisors in New Haven, Conn. “The majority who don’t elect to join generally are confused by their choices, and the confused mind does nothing.”

Definitely don’t opt out if your company offers automatic enrollment. It will also automatically select an investment option for you — often a target-date fund. Once you’re in the plan, take time to acquaint yourself with all its investment options so you can determine if the preselected fund is the best choice or if there’s one that better meets your goals, time horizon and risk tolerance.

Mistake No. 2: borrowing from your plan

Your company retirement plan is not a piggy bank. Treating it like one has very expensive consequences.

“Borrowing from a retirement account has become more prevalent,” Hottin says. “For someone out of work, it may be the only way to address some large expenses.

“My suggestion is always to exhaust other options prior to going into your 401(k), because it’s so expensive to do so. It could cost you as much as 40 cents on the dollar — and that is money you never recover.” That could occur if you borrow the money and then default on the loan, which results in a deemed distribution on which you would owe taxes and a penalty if you’re under a certain age.

“Some things are legal but just not wise,” Investor Solutions’ Gordon says. “This is one of those things.”

Mistake No. 3: cashing out in a job change

“I am always amazed by the number of people who cash out their plan when they leave their previous employer,” Gordon says. “I hear excuses like, ‘It was easier than rolling it over,’ ‘I needed the money for moving expenses,’ or, the best, ‘I used the money to fund my vacation before I started the new job.'”

Cashing out at 59 ½ years of age or younger, he says, carries a 10 percent penalty. “It doesn’t make sense to take the funds on which you have been earning less than 2 percent and pay a guaranteed penalty of 10 percent,” says Gordon.

Of course, this would be in addition to the taxes you would owe.

This also doesn’t take into account the returns you forfeit by not staying invested. Even small amounts cashed out when you’re young can prevent you from amassing a large nest egg. For example, if you had kept $5,000 in your retirement account 20 years ago instead of cashing it out, that amount could have grown to nearly $14,590 today, assuming a 5.5 percent annualized return.

While the last 10 years or so have been a challenge for investors, the stock market’s historical returns have rewarded them.

Mistake No. 4: leaving the account in limbo

Just leaving your retirement account with a former employer is also a bad option, Hottin says.

“If your former company downsizes or is acquired by another firm,” he says, “finding some contact who can help you retrieve it at a later time could be a hassle.

“It’s better to take your 401(k) with you and mix it in with your new employer’s plan — or roll it into an individual retirement account of some type so you can manage it a bit better.” If you do an IRA rollover, make sure it’s a trustee-to-trustee transfer.

Rolling it into your new employer’s account will give you continued creditor protection, says Green. “Even if you default on loans or you’re a defendant in a lawsuit and lose, nobody can touch the money in your 401(k) or 403(b).” Depending on the state you live in, he says, your money might also be protected in an IRA.

Mistake No. 5: too much company stock

Financial advisers caution you should have no more than 10 percent of your retirement account in your employer’s company stock. If you’re concentrated in a single security, you get hit with a double whammy if your company hits hard times and you lose your job.

“Having company stock in a 401(k) plan is good for the company in a few ways, but it’s a bad idea for the nonowner employees in many ways,” Gordon says. “If you’re thinking, ‘What about the Facebook or Google employees who are now millionaires because of their stock?’ don’t confuse luck with skill. On the streets of this nation, there are many former employees of Enron, PanAm, WorldCom and others who also believed in their company’s stock.”

Sometimes, companies make their stock available to employees at a discount through stock options or other direct purchase programs, he says. If you’re tempted, “you are probably best served by taking advantage of the discount and realizing the gain on the ‘discount’ as soon as (feasible).”

Mistake No. 6: ignoring the big picture

Your employer-sponsored retirement plan is just one leg of the proverbial three-legged stool of a retirement plan.

“One of the largest mistakes is lack of planning in a holistic sense,” Hottin says. “People fail to consider their retirement plans as part of the bigger picture. Your employee retirement account should be part of an overall strategy of financial well-being.”

In other words, Green says, the term “retirement plan” should refer not just to tax-qualified plans such as IRAs and 401(k)s, but also other sources of income such as Social Security, company pensions, part-time work and other money saved up — “your overall plan for how you’re going to get through the remainder of your life.”

Of course, many variables are beyond your control: You don’t know how long you will live, how your investments will perform or whether you’ll encounter an unforeseen expense that can derail your plans. So the best way to plan for the unexpected is to spend less, invest as much as you can and choose investments wisely.

8 Bad Money Habits to Drop by Retirement

Good Day,

Has it ever occurred to you that sometimes it’s not the system that is unfair, but rather you as an individual where you, subconsciously put yourself in harm’s way and blame the system later. As human beings, many people will generally never admit that they have an issue, and it becomes a problem when the same issue is the one that brings us down. Take an example of the various habits we have in regards to money, some of us are spenders, others are savers while others happen to fall in the middle. Spending money is not a bad habit, as long as you have your priorities right. As Jill Krasny explains in the following article, there are 8 bad money habits that you should drop before reaching retirement.

Baby boomers have borne the brunt of the recession burden and blame, but their bad money habits may be the root of the problem.

As many of these boomers near retirement, they face a dire financial situation spurred by years of financial mistakes. Luckily, these mistakes are correctable. MainStreet has tapped some financial experts to explain the most common money sins boomers commit so they can break the bad habit before retirement. Don’t say we didn’t warn you …

Not Saving for Retirement

MainStreet recently reported that one in six older Americans lives below the poverty line. This means millions, or 16% of seniors, lack the financial resources they need to get by and are being forced to take extreme measures such as cashing in assets, moving, returning to work or tapping the government for help.

Even if you’re not poor, don’t let a lack of planning hinder your financial future.

“These boomers think that it’s ‘after right now’ that it’s time to start saving,” says Stuart L. Ritter, a certified financial planner with T. Rowe Price, “but that’s a way to not have to make any changes.” Start saving now to spare yourself the heartache later.

Obsessing About Taxes

Ritter says one of the top misconceptions boomers have about individual retirement accounts is that taxes account for everything. And while they do matter to an extent, “a lot of people say that they want to pay less in taxes, when I’d personally like to pay significantly more. Hey, I want my boss to give me a massive salary increase so that I would pay more in taxes!” Ritter says.

Unfortunately, using taxes as the sole criterion for whether you use a Roth IRA or a traditional IRA can also mean higher long-term costs down the road, Ritter notes.

“Often, an upfront tax loss [with a Roth IRA] will give you more to spend in retirement,” but many will opt for the traditional IRA because it looks better on paper.

The ‘I’ll Just Work Longer’ Mentality

“I’ll start my diet tomorrow” is a common excuse heard long after New Year’s Eve, but are you taking the same approach to your savings by saying you’ll push-off retirement to work longer?

If so, you’re only procrastinating, and that’s not an effective savings strategy, Ritter says. By planning your finances ahead of time, you won’t need to pseudo-commit yourself to work, which may or may not be an option, depending on your health (and the economy).

Betting on Your Inheritance

The nation’s largest-ever intergenerational transfer of wealth is under way, and a nest egg of $11.6 trillion will be handed over to boomers from their elderly parents.

But you might not be one of these lucky inheritors, says Gabrielle Clemens, a certified divorce financial planner, and you’ll need to manage your assets on your own. “Many of these people, especially divorcees, are banking on their inheritance,” Clemens told MainStreet. But when tragedy strikes, Americans turn to three bad options: credit cards, the generosity of living family members and even bankruptcy. Keep your dignity intact and you won’t have to go down those rabbit holes.

Skipping Long-Term Care

“Having a plan for long-term care, whether that’s insurance, is something probably every boomer should consider,” Ritter says. Yet few boomers aged 46 to 64 actually do, according to a recent New York Life Insurance survey. While many boomers value long-term care and the role it played in their own parents’ lives, only 9% of 1,073 online respondents actually bought coverage for themselves because many (47%) felt they won’t ever need it or assume the government will foot the bill.

Still, as America’s health care costs ramp up and obesity and morbidity grow alongside it, older Americans face a decreased quality of life and need to be prepared.

Forgoing Employee Benefits

Are you working for one of those post-recession employers that still shows employees it cares? Wise up and sign on for the benefits being offered.

As TheStreet recently reported, “with the worst of the recession in the in the rearview mirror, benefits are getting a second look,” and some employers are finding cheap but effective ways to make employees feel special. That might mean adding a couple more days of paid vacation (not to mention holiday, sick and personal time) or throwing in retirement perks, from pensions to 401(k) plans. Sounds good to us — it should to you, too.

Not Using Your FSA

Too many boomers fall into the trap of thinking that if you don’t use it, you’ll lose it, Ritter says. While this is true with flexible spending accounts (FSAs, in which pretax income is set aside to pay for health or dependent care expenses), the tax benefit can outweigh the use-it-or-lose-it provision. “That’s all they’ll focus on and they’ll give up huge benefits that FSAs provides.”

Think about it this way: Without an FSA, $100 of salary taxed at 30% to 40% means you’ll lose $30 to $40. “But here’s the counterintuitive thing,” Ritter adds, “if at the end of the year you didn’t use the $100, you’ve still got $30 and loose change and you’ll come out ahead.”

Besides, with an FSA there are deals to be had. “Every optometrist has a sign saying ‘use your FSA at end of the year,'” Ritter notes.

Taking Social Security Too Soon

Remember the phrase “Good things come to those who wait?” According to Ritter, “taking your Social Security too early isn’t part of a solid financial plan either.” That’s because for every year you stave off the temptation to take those funds, you’ll get a 7% to 8% payout increase guaranteed and adjusted for inflation up to age 70. Many boomers do it because they can, but they’re really only hurting themselves in the long run.

7 things you must know about the ‘new retirement’

Good Day,

I think we’re all in agreement when I say that a lot has changed in the last 25 years or so, truth be told, a lot has changed in the last 5 years, to be exact, since the financial meltdown, and retirement planning is no exception. Things that were considered basic when it came to retirement are no longer working, for example, the 4% withdrawal rule that was once a ‘policy’ for any retirement account, nowadays depends on the financial circumstance the retiree may be facing. Basically, we have a new retirement ball game, and you need to keep in touch with the changes, so as not to be caught unawares. The following article by Dana Dratch gives seven things that every person planning on saving for retirement and those who are already retired, must know about the ‘new retirement.’

This isn’t your daddy’s retirement. And it’s not for the faint of heart.

Do-it-yourself 401(k)s, IRAs and multiple-choice Medicare supplement plans have taken the place of the company pension plan, retiree health benefits and a gold watch.

And working into retirement — in the form of a second (or third) career or part-time job — is becoming the norm.

“It’s a changing landscape,” says Sara Rix, a senior strategic policy adviser with AARP.

But this evolution hasn’t happened overnight, she says. “Some of the changes we’re seeing began 20 to 25 years ago.”

One major adjustment: People are working longer. In 1985, there was fewer than 1 in 5 65- to 69-year-olds in the workforce, Rix says. Today, it’s almost 1 in 3 — a 74 percent increase.

Some would-be retirees need the money, says Rix. Others enjoy their jobs and want to keep at it. And, for some, it can be a combination of the two.

Whether you’re 25 or 75, you should know these seven things about retirement in the new millennium.

You’re on your own

It’s like one of those high school math brain-twisters: The amount you save times your compounded earnings, minus any investment losses and factoring for inflation, equals what standard of living at some (movable) future date?

“People have to be much more proactive,” says Tony Webb, research economist with the Center for Retirement Research at Boston College.

A study by the center using the Federal Reserve’s 2007 Survey of Consumer Finances showed that half the people on the cusp of retirement (ages 55 to 64) had a retirement account balance of less than $100,000. At a typical drawdown rate of about 4 percent per year, that equals about $4,000 annually, or about $333 a month in retirement income, Webb says.

One big problem with everything financial is that you pick up skills as you move along — and make plenty of mistakes along the way, says Webb.

And, unlike a lot of situations, the people retiring now can’t look to past generations as a model because the game has changed, he adds.

Start planning early

It doesn’t take a rocket scientist to calculate that saving for 50 years will yield more than saving for 20 years.

But what 20-year-old wants to forgo critical funds for a day that’s so far off into the future?

That’s why a recent Stanford University study has gotten so much attention, says Ruth Hayden, financial consultant and author of “Start Where You Are: Retirement Planning in a Changing World.”

Researchers found out that when they showed young workers digitally aged photos of themselves at retirement age, workers were more willing to put money aside for their future selves.

“It changes their perception,” Hayden says. And when it comes to planning for retirement, “that intellectual and emotional ownership is critical.”

One big rule for the new retirement: Financial literacy needs to be a lifelong pursuit, says Rix.

Do it right, and money planning will be downright boring, Hayden says. “Plain-vanilla” strategies — such as regular contributions, slow-and-steady growth and diversification — are often most effective over the long haul, she says. It’s also important to get advice from trusted, neutral advisers when you can afford it, she says.

Two of the biggest mistakes employees make is cashing out the 401(k) after a job change and leaving an employer’s matching dollars on the table, says Hayden.

Money can be accessible

It used to be that when you put away money for retirement, you couldn’t touch it until retirement — except in some very limited circumstances.

That’s not always true anymore.

With a Roth IRA, you can withdraw any money you contribute at any time without taxes or penalties, says Ed Slott, CPA and author of “The Retirement Savings Time Bomb … and How to Defuse It.”

The idea that retirement savings is locked up for a far-flung future date is a mental block for a lot of potential savers, says Slott. “That is one of the things that turned me off from (traditional) IRAs years ago,” he says. “But now that’s not the case with a Roth.”

The nice thing about a Roth is those earnings won’t be taxed during retirement. The trade-off with a Roth is that you don’t get a tax deduction now when you make a contribution.

But continuous access to your money and the ability to grow it tax-free more than make up for forfeiting a one-time tax deduction, says Slott.

“When you make a $5,000 contribution to a Roth IRA, you have immediate access to that money,” says Slott. “So if you need it, it’s there.”

You can contribute to an IRA

You contribute to a 401(k) through work. Or you’re a stay-at-home spouse with no income.

In either case, you can still probably use an IRA to save for your retirement, says Slott.

Workers already contributing to a 401(k) can most likely still make contributions to an IRA if they want, he says. “A lot of times they think if they’re in a company plan, they’re not allowed,” he says. “But that’s not true.”

Earn above a set income, though, and you may not get the full tax deduction for your traditional IRA contributions, says Slott. But that income ceiling won’t affect most wage-earners, he says. IRS Publication 590 provides details about IRAs.

With a Roth IRA, there is no tax deduction, “but there are some high-income limits for who can contribute,” he says.

Not working outside the home? As long as your spouse is earning enough to cover the contribution, you can fund your own spousal IRA in your own name, he says.

With an IRA, you can bank up to $5,000 annually per person, if you’re 49 or younger. Fifty or older? You can salt away up to $6,000 this year.

Consider health care

One area many people don’t consider in their retirement planning is medical costs.

Often, younger workers assume that Medicare covers everything, but it doesn’t.

After the age of 65, the average couple will spend about $260,000 out-of-pocket on health care, including insurance premiums and nursing home care, according to a 2010 study by the Center for Retirement Research at Boston College.

“The problem is most households don’t have $260,000 in the first place,” says Webb. “What it means is that in practical terms, a lot of households face the risk of impoverishment or ending up on Medicaid.”

Prepare to work longer

Many of today’s “retirees” are staying in or rejoining the work force.

For some, it’s a financial necessity. For others, it’s a chance to pursue interests or careers they put off in their younger years. And for many, it can be a combination of both.

“And maybe the nature of retirement is changing,” says Webb. “It’s less of a clean break.”

Postponing Social Security payments or retirement account withdrawals often means you’ll get more when you do tap those sources.

For those retiring over the next few years, delaying collecting Social Security from 62 to 70 can mean a 76 percent increase in benefits, says Webb.

Two factors may force workers to retire earlier than expected: late-in-life job loss and health problems, he says.

Seniors face a greater risk of having to leave the working world because of health, and also of “being prematurely ejected from the workforce,” says Webb.

Think beyond the money

When you’re planning and saving for your golden years, don’t hesitate to think beyond the money.

Throughout your working life, “Keep your eye on the next job, and prepare so that (your) skills are what employers are seeking,” says Rix.

It also doesn’t hurt to be a little entrepreneurial, says Martin Yate, author of “Knock ‘Em Dead: Secrets and Strategies for Success in an Uncertain World.”

If you find something that gives you joy, stick with it, he says. Figure that in time, “I will learn how to make a buck,” Yate says. “And in my 50s and 60s, I will either have a little business on the side or be prepared to launch one.”

And if your needs and interests change or get refined as the decades go by, that’s OK, says Yate.

Whatever your entrepreneurial dreams, you’ll be using and sharpening many of the same transferable skills you use in your “day job,” he says. “It will help you be successful.”

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