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	Planning For Retirement

	by Cindy Diccianni

People have many different financial goals, but one they share in common is to be financially independent. I define that as the time when we conclude that our annual expenses can be COVERED for the rest of our lives without working any longer. Calculating your expenses over the next 25-40 years with any degree of accuracy is a very difficult task. The second daunting task is determining your SOURCES of retirement income.

ASKING THE RIGHT QUESTIONS

To determine future expenses, we need to answer the following questions:

How much will it COST my spouse and I to live?
How LONG will my spouse and I live?
Will I need to SUPPORT parents, kids, grandchildren, etc.?

There are some reasonable assumptions that some financial planners can make, however, as you can see it is very difficult to predict the course of time.

HOW MUCH WILL IT COST TO LIVE?

The best way to design a retirement budget is to have two types of budgets in retirement. The first budget is an actual EXPENSE budget with all needed expenses. And the second budget is a DREAM LIST of items that if the money were available they would buy. Basic retirement expenses are around 75% of the normal non-retired living expenses. Usually there is no mortgage on your home and there are several senior discounts that are available. However, most financial advisors know that this is not always a realistic approach. A better way to look at your costs is in terms of the types of expenses you will have during different portions of your retirement.

THE STAGES OF RETIREMENT

There are three basic stages of retirement. The first phase is the ACTIVE phase when most people travel and do all the "things" they waited all their lives to do. This phase is the most expensive phase and often the retirees enjoy the good things of life. Once these wants are met the second phase of retirement is often active but a less expensive stage. The third phase is also an expensive phase when HEALTH CARE needs become more expensive.

HOW LONG WILL WE LIVE?

Longevity can be predicted to some degree of accuracy by looking at your family's health HISTORY -- then you can compare your lifestyle with that of other family members and determine if you are in better or worse shape than them. Currently the standard age assumption for calculating your retirement needs is to 100 years, with some feeling that it is a conservative estimate. And let's not forget about INFLATION, no one can afford to ignore the effects of inflation. No matter what your monthly budget may be when you begin your retirement, the current inflationary rate of 4-5 % needs to be factored into the equation.

POOR HEALTH IS EXPENSIVE

The quality of life we experience and the way that we go also greatly affects our financial future. A quick and pain-free death is much less expensive than a long and lingering illness or chronic condition. To address the possibility of excessive medical needs in the future we strongly recommend that people buy LONG-TERM CARE insurance to protect against medical expenses. This will help to act as a cushion for a retiree.

SUPPORTING OTHERS AFTER YOU RETIRE

Most retirees can cover their own expenses fairly easily with careful planning. However, one expense that most people do not anticipate is caring for others. This could be parents, children, and / or grandchildren. In the case of children, it is my experience that these expenses can be unlimited. First there is college, then graduate school, then marriage, their first home and grandchildren. One of the most difficult tasks that financial planners have is telling my clients that they must tell their children that they cannot AFFORD to support them indefinitely.

ENDING THE GUESSING GAME

In summary, retirement expenses are difficult, but not impossible, to PREDICT. Using current costs, a historic rate of inflation and a life expectancy of 100 years, we can come up with a reasonably accurate estimate of living expenses.

Cindy Diccianni is a Registered Investment Advisor and a Registered Representative with Leigh Baldwin And Company member NASD and SIPC. She is affiliated with Ortner, O'Brien And Ortner Advisory Group, Inc. and co-founder of Nurturing Your Success, Inc. Her passion is assisting clients in creating the financial freedom they dream of. Visit her website at www.nurturingyoursuccess.com. You may contact Cindy at or (610) 251-9393 x 206.

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