Retirement is not as easy as it used to be

What is Retirement?

Retirement is the point in life at which an individual is financially able to withdrawal from their fulltime occupation.

The importance of Retirement

When considering where to begin, it's necessary to ask yourself a number of questions about how you view your retirement years. Consider how much you will need to live comfortably when retired. The word "comfortably" is key. If you've become accustomed to eating out each night or traveling when the urge hits, consider what you will need to maintain such a lifestyle, if desired.

Think about your goals for retirement.

If a job or financial burdens have kept you from doing some of the things you've always wanted to do, such as travel, research how much you'll need to have each month in order to attain specific goals, such as an excursion to Europe or a motorhome.

If health is a concern for you or your spouse, consider what you may need to set aside for nursing care or residence in an assisted-living facility. Will you need long-term care insurance or will your savings vehicles be sufficient in case an emergency arises?

Once you've determined the cost of the necessities, dreams, and wishes for your post-retirement life, investigate which financial tools can best assist you. If you're starting your retirement planning at a late age, you may need to choose products that will require you to assume more risk but allow you to acquire the funds you'll need more quickly.

Many individuals find the whole world of retirement planning to be quite overwhelming. If that's the case, consult a financial representative or your tax consultant for information on which products would best assist you in reaching your goals.

Fast Facts

According to Pacific Life:

• Almost 58% of American workers have not calculated how much money they will need to save for retirement.
• Most workers have not saved enough for retirement. Almost half have saved less than $50,000.
• Social Security and pensions only account for 58% of your income in retirement.

Lifecycle Advice

Myths of Retirement

1. I have to replace 100 percent of my pre-retirement income in retirement.
   Most people need between 65 to 85 percent to be secure.
2. People will have enough resources to maintain financially when they retire.
   Almost 45 percent of working-age households are at risk of failing to meet this objective, according to the Center's new National Retirement Risk Index.
3. Younger workers will be better prepared in retirement than Baby Boomers.
   Younger workers are more vulnerable, nearly half of households are at risk.
4. Social Security will still replace 42 percent of an average worker's earnings.
   Net Social Security replacement rates will drop to 30 percent by 2030, adjusting for the rising Normal Retirement Age, taxation of benefits, and higher Medicare premiums.
5. Traditional defined benefit plans still cover a large share of the workforce.
   In 2003, only 10 percent of all private sector workers with pensions were covered solely by a defined benefit plan.
6. 401(k)'s have allowed workers to save significant amounts for retirement.
   In 2004, the typical household head approaching retirement had only $60,000 in 401(k) and IRA accounts, which translates into less than $400 per month in retirement.
7. If today's workers save equally to their parents, retirement will be secure.
   Current workers must save more because of the demise of traditional pensions, rising longevity, soaring health care costs, and falling asset returns.
8. People can rely on the equity in their house to finance their retirement.
   Retirees need somewhere to live, so they can tap only a portion of their house's value with a reverse mortgage - about 45 percent at current interest rates and less if rates rise from today's low levels.
9. It's too hard to save enough for retirement.
   If you consistently set aside 6 percent of your paycheck (with a 3 percent employer match), invest prudently, and leave the money alone, you should have enough money to retire when its time. If you consistently set aside 6 percent of your paycheck (with a 3 percent employer match), invest prudently, and leave the money alone, you should have enough money to retire when its time.
10. Decreasing retirement income means people have to work until they die.
    Working to age 67, and not drawing income from Social Security or 401(k)s would allow most people to have a secure retirement.