Late retirement planning
First thing is to examine the numbers to find whether or not yu can expect a shortfall. Bear in mind that if you own your own home prior to retirement, you living expenses will be quite modest. Work on drawing about 4-5% of your capital per annum.
Here are two free online calculators:
American Savings Education Council’s Ballpark Estimate
http://www.asec.org/ballpark/index.htm
Smart Money’s Retirement Worksheet
http://www.smartmoney.com/retirement/planning/index.cfm
Either keep or begin saving. If you don’t already know, find out what the maximum amount you are allowed to contribute to your company sponsored retirement plan, then increase your contribution. This is especially beneficial if your employer matches your contributions.
The maximum 401(k), 403(b) or 457 plan contribution allowed in 2002 was only $11,000 with allowable increases in 2005 of $14,000 and $15,000 in 2006.
If you are age 50 or older you can contribute an additional amount of $4,000 in 2005 and $5,000 in 2006.
If you are self-employed you can contribute as much as $40,000 a year to a qualified retirement plan account and since the contribution is tax-deductible, the government actually subsidizes about one-third or more dependent upon your tax bracket.
Cut down large expenditures. Clothing, restaurant meals, fancy vacations and other non-essentials can easily save some people as much as $1,000 a month. If that $1,000 is invested at 8% per year at the end of 10 years it will have reached a nice nest egg of $185,000.
That still won’t be enough for a “comfortable” retirement.
If you have children in college have them begin to shoulder some of the expense. If they have not yet begun college, have them attend a local school and live at home for two years. After than they can transfer to a private university and take out student loans to pay for it. This alone can save you over $100,000 per child over four years.
Downsize your family home. Chances are, if you have lived in your home for more than five years or so, you have substantial equity. Selling that home and moving to something smaller will release that equity that could be used to help finance your retirement. Using the same figure of 8%, if you realize $150,000 in equity invested over ten years you’ll end up with $333,000.
Whatever you do, create a diversified portfolio and don’t chase rainbows! The time for conservative investment is now. An allocation for someone who is close to retirement is 70% stocks for future growth and 30% bonds for current stability. Divide the stock portion between large, mid and small cap funds.
It’s not too late to start!