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United States Secretary of Labor

This publication has been developed by the U.S. Department of Labor, The key to a comfortable retirement is planning
Employment Benefits Security Administration, and its partners. It is available well in advance. Yet a recent survey indicates that
on the Internet at: www.dol.gov/ebsa. with the “Baby Boom” generation approaching
retirement age, less than half of Americans have
For a complete list of EBSA publications or to speak with a benefits advisor, calculated how much they will need to save for
call toll free: 1-866-444-EBSA (3272). Or contact the agency electronically at retirement.
http://askebsa.dol.gov.
To help Americans prepare for retirement, the
U.S. Department of Labor has developed this
book: Taking the Mystery Out of Retirement Planning. The information
contained here is valuable to everyone, but it is specifically designed
created by
to help those who are about a decade from retirement.
Employee Benefits Security Administration
in partnership with Americans are living longer, healthier, and more active lives than
ever before. Ideally, retirement years are a time for pursuing other
interests, travel, perhaps volunteering in the community or even
starting a new career.

To ensure a financially secure retirement, it is critical to make the
right choices years ahead. Start on the path to retirement security
today so you can have the retirement you have dreamed of.

We also thank the AARP for its valuable contributions to this publication. Sincerely,

This booklet constitutes a small entity compliance guide for purposes of the Small Business
Regulatory Enforcement Act of 1996.
Elaine L. Chao

September 2006

TABLE OF CONTENTS
PLANNING FOR A LIFETIME 2
Chapter 1
TRACKING DOWN TODAY’S MONEY 5
Worksheet A-Today’s Money
Chapter 2
TRACKING DOWN FUTURE MONEY...AT RETIREMENT AND AFTER 9
Worksheet B-Your Money...10 Years from Today
Worksheet C-New Savings Between Now and Retirement
Worksheet D-Monthly Income Over a 30-Year Retirement
Chapter 3
TRACKING DOWN FUTURE EXPENSES 17
Worksheet E-Monthly Expenses Today
Worksheet F-Monthly Expenses in 10 Years
Chapter 4
COMPARING INCOME AND EXPENSES 27
Worksheet G- Comparing Projected Income and Expenses
Worksheet H-Additional Savings Needed Before Retirement

Chapter 5
MAKING YOUR MONEY LAST 35
Chapter 6
TRACKING DOWN HELP FOR RETIREMENT RESOURCES 41

PLANNING FOR A LIFETIME It's not going to be your parents’ retirement—rewarded at 65 with a gold watch. retiring in this new century is a mystery. With a longer and healthier life span. planes. bikes. and health insurance for life. boats. but now many workers will need to rely on their own work-related and personal savings plus Social Security benefits. Today’s (and tomorrow’s) retirees may well have a new kind of retirement. 2 . For many Americans. and RVs may be part of your life. Earlier generations of workers could rely on employer- provided pensions. because you are more likely than previous generations to be an active older American. These savings have to last longer because Americans are living longer. often into their eighties and nineties. a guaranteed pension. If you are one of those people who want to plan – and are about 10 years from the day you retire – this booklet is for you.

Remember these amounts are only t For some. a different timeframe – or even if you are retired – this then spend some time gathering the documents and information you will want to keep. but also from the “miracle of com. In familiar with retirement issues. To new career. That period between based on the average 65-year old American male living 17 Getting started today will help you put time on your side. may different part of your financial life – your savings and your not be covered by the federal Medicare of earnings from interest and from investments continually be new to you. more medical care. approach the booklet chapter by chapter or all at e dic a re . boum a v in g m o n ey in means y b e n efits. retirement. control of your finances so that when you retire. how much you may need to last over a 30-year m tire AT AGE 50anBeagdind. but delaying t le ecurit Whether you are 10 years from retirement or have or two chapters. The time to start is today. ties to make changes so you can have the kind of retirement Finally. some of which will Each chapter in this booklet asks you to chart a pounding. by the Employee Benefit Research Institute (EBRI) suggests that only 42 percent of Americans have tried to How to Use This Booklet: Simply read it to get CLUE 1 calculate how much they need to save for retirement. r fu m s AT 66 Eligible fo g minimum withdrawalsbefrcohmarged heavy tax penaltie guessing is okay. As you read through this booklet. and become a volunteer now and then is an important one. into your retirement years. Don't get stuck on details – financially secure future. o th e rw ise This booklet uses three time periods in charting your accounts . The timeline offers some milestone opportuni- expenses – and helps you project future costs and savings well program. and life has a way of throwing changes our way. when you are in the future about 56 years old and plan to work approximately 10 years more. when you are about 65 to 66 years old. Taking the Mystery Out of Retirement Planning offers a can make your future an adventure. you may AT 70 1⁄2 Sbtayrth is age . Whether you booklet will help you to unravel the financial mysteries of means a 4. however. worrying about. It will grow. and you will want to update them from dra w a ls fro m retiremen over 50 c ith others. Regard them as a starting point. t takin . it's starting a new hobby or craft. This is a good time to take stock of where you are in terms of retirement savings and set financial goals you would like to achieve in the 10-year period you plan to work. But getting time The whole retirement scene has changed and many the approximately 30-year span you hope to enjoy on your side now. Take your time. time to time.” the world’s greatest math discovery. bottom-line approach to figuring out just how much 10) years. you will have time to put more of your paycheck years. and the time and money to do what you've always wanted. The worksheets in this booklet longer life. start a Time on Your Side The second point in time is the day you retire. not only from help you avoid outliving your income. according to Timeline for Retirement that follows. Opportunities to take courses. This is the result "catch-up" retirement contributions beginning at age 50.m. For estimates. ore ta m o it’s starting a new life. like everyone’s favorite genius. keep going. keep an eye on the will provide a guesstimate. it's simply being with friends and family. you may need when you retire. retirement savings. A simplified. In those (approximately more years and the average 65-year old female living 20 more help. a 2006 survey at 3 a. And for some. 3 4 . x p e n a ltie s on early w re time for it to grow. Albert Einstein. Some of the terms. each chapter will give you clues on how to take the worksheets to figure the dollar amounts of what eli n e F o r Re s. the future. increasing the base amount. These are only averages. before you retire. means you will not be awake American workers find it a mystery. and you can always come back later with more accurate numbers and information. b e tw e en 1943 and 195 r M rn AT 65 Eligible fo ll Social Security benefits if bo ost retirement life after work and to discover changes you can make for a once. how much it will grow in 10 years. you have you have. fill out t i r e m en t: se this booklet. Better yet. In fact. so planning for 30 years will to work in a retirement account. fill out the worksheets provided and accounts a g e to re ceive Social S um AT 62 Thebigmginerimmonthly benefit. to 401(k) and other re period. the third time period used in this booklet is you want. an extra amount that tho Tim aking catch-up contribumtioennt accounts. The starting point is today. It is the time period experts suggest you plan for. You may want to tackle one AT 59 1⁄2 N. instead of planning for. will also mean your additional savings. no one has a crystal ball. Of course.

Know what assets you can out what part of today’s money can go IRA. The loss of a spouse can sometimes mean the loss consider they actually have. First. extra worksheets are included at the back of this booklet. that you plan to use when you retire in about 10 years (do not add Social Security and traditional to touch for at least 10 years. You don't want Remember you're facing a retirement that's probably going to their retirement make it easy. To be a pleasant surprise. Second. rather than more. through widowhood. like 401(k) plans. or even fine jewelry. in financial jeopardy. is counted. quality financial institutions so it is easier to In this case. understanding your current financial standing should automatically start you thinking about how to figure will be your first important clue. Money in face the very real work-related retirement plans. The longer it's "lost. In fact." the harder it figure out their When filling out the worksheets that follow. account could take time. will affect the numbers on Worksheet A. the money women believe they Recording current and old retirement account investments. The 2006 EBRI on). important for a couple of reasons. and anything of value you amounts on Worksheet A. financial futures remember to include your spouse's assets if you're married. and toward retirement simply means adding is a good time to think about keeping your money with fewer. savings bonds. locating any old can exchange for cash. dies or you divorce. wills. retirement plan documents. women will need to focus on their financial resources as a and as a single person. For that reason. you also don't want to If you are a married include any future Social Security benefits and guaranteed on the mystery of where you will find pensions because these items are future income.” ABOUT WORKSHEET A (PAGE 8): TODAY’S MONEY Here you will write down money you have today trip – only money that you are not going planningYou for. and to retirement benefits if your spouse For purposes of the following worksheets. can choose to stop worrying and start figuring. be prepared to Recording these amounts could Quit Worrying. Start Planning ended up changing redo this first one. for example. Like all of the worksheets in this booklet. women the money to support assets (and they will be included later). This will be to find. you count on. Consider what happens to your Social Security If you didn't roll over your retirement plan balance when you on when they no longer work. 5 6 . The first money source. make your money grow. Finding changed jobs into a new retirement plan account or into an single person as well as half of a couple. the future. Remember that wills are important. not current woman: In preparing for retirement. without the support these assets will probably be at the top of your of a husband -. Check Social Security benefit may discover some forgotten retirement assets you have. A raise and changes in your investments. instead of savings plan. they will be figured in later are good you might change the way you save. but they may not provide the protection desired.most likely have a clear idea of how much money “today’s money” list that follows. This new kind of retirement probably means there are many American workers worrying about. This documents. “51 percent of Depending on the way assets are titled or the terms of a will. manage. up the value of all your current assets. possibility of spend- yourself in retirement. or if you didn’t take your account balance as cash. so it’s hard to know More Than You Think or reduction of benefits that can place women filling them out as a couple how much they might be able to count Tracking your money in retirement plans should be fairly easy. the chances pensions at this stage. and you will want to include ing part of their retirement years Many people don’t amounts from current and former jobs. Chapter 1 TRACKING DOWN TODAY’S MONEY This chapter will help you shine a light purposes of the following worksheet. however. like your house. is people who tried to can count on may not be passed to the surviving spouse. For Not only will you come up with facts to work with. the balance on your survey also found that 51 percent of people who tried to figure current retirement plan account at work (a 401(k) out their financial futures ended up changing their retirement savings plans. Today’s Money (see page 8). "assets" are cash. to count emergency money and savings be for your children's education or a big longer than your parents' and will involve more uncertainties.

and that condo Keogh former jobs into an IRA. Then add all the numbers down column 3 and write the total in column 3 at the bottom. U. ask might be available Work-related retirement savings the benefits depart. and individual stocks and bonds. or you Personal savings and investments can check on the Internet recent sales in your neighborhood (real estate values can change. for retirement. plan. then read your statement fees. savings.” estate professional can give you an estimate of the value of your house in the current market. for instance). Keep in mind that the actual value of items like SIMPLE IRA IRAs).S. etc. and collections can be Employees of Small Employers (SIMPLE) plans. Simplified Employee Pension-IRAs (SEP.. and rent tend to go up. The bank holding will always need the mortgage can provide the amount of your (enter as Mortgage and liens negative amount) remaining mortgage balance. TOTAL ASSETS 7 8 . Keogh retirement collections or the cash value of life insurance. Also subtract the amount you owe on home equity Market value of home retirement.. Be realistic about should be easy to how much of your 1 2 3 find. Remember that 401(k) or 403(b) If you rolled you will always over accounts from need housing.) however. savings bonds. so check your home’s value from time to time). ment at work. as possible retirement resources. get statements from all your bank or Other assets could be valuable SEP-IRA mutual fund IRA accounts. An appraiser or real housing. “Be realistic about IRAs (Roth) how much of your certificates of deposit. Other assets (collections. Other home equity might To get a dollar amount for your home equity. maintenance and or call the financial institution holding this account. They could be in a savings or checking account at a bank or credit IRAs (traditional) union or in a brokerage account. subtract the current mortgage balance Home equity be available for from the current market value of your house.you loans or lines of credit (enter it as a negative amount on the worksheet). real estate taxes. boats. The assets in these accounts may include cash. Add up the money across each row for you and your spouse and write the total in column 3. determined only when real buyers make Other Personal savings and investments are next real offers. repairs. In addition. stock and bond mutual funds. WORKSHEET A TODAY’S MONEY Instructions: Record amounts for yourself and for your spouse in columns 1 and 2. and Savings Incentive Match Plans for houses. If you don't have home equity You Spouse Total a recent statement.

In the example above. As an example. etc. your rates of return to different pots of money – workplace savings it’s just a guesstimate. especially in will probably grow – in interest rate is fixed. You are practicing deposit (CDs) were paying 12 percent. One kind of investment. Investments in you spread your category as well. by higher returns is taking on more risk. The worksheets will help investment would increase to $16. with some money invested in is diversified.you have put aside investment is following the financial market for that particular category. the worksheets in this securities can bring a higher rate of return than simple interest because prices of securities often rise and gains are chapter will let you see how much your compounded. is a bond. a Standard and Poor’s retirement." such as a savings. Chapter 2 TRACKING DOWN FUTURE MONEY-AT RETIREMENT AND AFTER Now that you know from Chapter 1 how your money over the next 10 years. you are investments helps reduce risk as markets move up and down. Financial planners believe that diversifying your different types of savings and to see how stocks and some in a safer. as we saw money among a various types of assets (such as large company stocks. Keep this in mind in selecting rates of return for so that your money their nature. checking.289 in 10 years. A general allocation is to have some money in "cash. further in the future you plan. which is often referred but a likely higher to as a "fixed income" investment because the return.000 in a checking account that you never use. Then let's say you've invested in a recommend that "diversified. such as (S&P) index fund tracks the 500 broad- you project a 10-year total. For Index. since mutual funds. that closely match the performance of the based stocks that comprise the S&P 500 major holdings for that category of investment. In fact. For example.” bonds. For instance. money in bonds. bank savings accounts -. stocks were barely “asset allocation” by putting your money in different types of products that earn different rates of return. A bond index fund would track the performance of help you estimate a 30-year total. most experts add that you should not only invest among categories but within each major for your retirement years. Your rate of return. You will probably want to dig deeper by assigning different major bond holdings in that index. Index funds are a collection of investments. the more for retirement.000 and you got a Another way to spread your investments 5 percent return (or yield) on your investment. the 10 years between now and a bond with an original value of $10. “Experts Experts recommend that you spread your money among a range of investments so that your money is some idea of how much you may have But your money is safe. to assign different rates of return to the worksheets that follow. security prices can fall. 10 . return. your original among different categories is to invest in index mutual instance. will be low. interest-bearing account. with more risk worth – because it instance. IRAs. in this case.* stock mutual fund for 15 years using your retirement plan account and you get a return of 11 percent. Let's say you have $2. small company stocks and bonds). such as the and some money in money could be economy. But the totals give you interest compounded monthly. some the amount your money earns over a certain period. in 1980 when some certificates of your decisions can impact the growth of already doing what the experts recommend. and other factors. you can How your money increases over time will depend on little more risk but estimate how much that the nature of your investments. Yes. if you owned the long run. with a much money you have today. In this way. which will Digging Deeper bonds or stocks. Of course. with that can happen. maybe 1 percent. the rates of paying more interest. because the accounts. your risk of losing money is less if you buy shares in several mutual funds investing in In addition. including the risk of different ways." In addition. you will be able losing money. Rates of return are simply little or no risk. funds. for stocks. The tradeoff for aiming for range of investments mutual fund will help you to diversify compared to investing in individual securities on your own. allow you to invest in a collection of stocks. or money market account with 9 *People who are retired may want to skip the worksheets in this chapter and focus on the information about ways to grow your money. Even investing in just one money can grow by investing it in with stocks in 2000 and 2001. Financial planners highly recommend this technique as a way to spread risk.

54 S&P 500 Ind m pany stocks) s m all co 401(k) or 403(b) Index ( Russell 2000 x 7. This can be risky. This ties both your current paycheck and your retirement savings to $100.and include multiplication factors for each of these rates. percent rate of return for 10 years).00 (total from Worksheet A) x 1. 5.000.) and 7 percent -. by the way. Chapter 1.72 e rs 30 -y ea r bond inde th Lehman Bro Keogh SEP-IRA SIMPLE IRA ABOUT WORKSHEETS B (PAGE 12) AND C (PAGE 14): YOUR MONEY holding their own. The result shows how much you will have if your money grows at 5 many American workers are holding a lot of their Other percent in that 10-year period. CLUE 2 WORKSHEET B A n nu al R e t u r ns YOUR MONEY- Ave ra ge : 19 9 5 -20 04 10 YEARS FROM TODAY -Ye ar Pe r iod Over10 PERCENT Asset Growth Factors for Three Selected Rates of Return 1. (rate of return) (Column 1x Column 2) 10-year ) pany stocks Column 3) e co m Work-related retirement savings ex (la rg 11. For example. To keep it simple. Other assets (collections. (Instructions continue on pg. and the worksheets that Personal savings and investments follow let you do just that. Mortgage and liens negative amount) But digging deeper may mean coming up with your own numbers. by 1.629 (the factor equal to a 5 IRAs (Roth) always a bad idea and puts your money at risk. and CDs were paying 5 percent.07 (from Worksheet A.42 Checking ac value factor in 10 years certific ate of deposit 12.344 for 3% 1.15 1 2 3 o n ey Current $ Asset growth Asset value count/m 5. For example: employers' stock in their retirement accounts.629 Home equity one employer's success … or failure. the worksheets give you a choice of rates of return – 3.967 for 7% INVESTMENT m arket account 4.900. You will see sample One quick way to estimate how much money you rates of return for some common places to put your money could have by your first year of retirement is to IRAs (traditional) in the box above. multiply your total retirement assets from Worksheet Too much money in one type of investment is A. is used to keep Market value of home things simple: remember investment returns go up (enter as and down and cannot be guaranteed.13) TOTAL ASSETS 11 12 . but in 1999 most stock prices were rising AND NEW SAVINGS Other fast. etc. $162.00 The 5 percent return.629 for 5% 1.

etc. Whether you're an optimist or a pessimist since those would be repaid from any cash you 1 2 3 about interest and rates of return. WORKSHEET C NEW SAVINGS BETWEEN NOW AND RETIREMENT Savings Growth Factors for Three Selected Rates of Return They are lower than the 8 to 10 percent on how much a buyer would pay. an 401(k) or 403(b) might grow over 10 years. being would obtain on the sale of the home. value.00 (amount in an IRA) in Column 3. put them in the “Other assets” row savings factor in 10 years Worksheet B.085 for 7% returns often used before the stock market fell in any mortgage or liens you have on the home 2000. Write the total $10. There will be more later in the between now and retirement in the first publication about how waiting to receive Social column. Your calculation would look results by an asset growth (rate of return) factor like this: SIMPLE IRA you'll see at the top of Worksheet B.000. Social Security benefits your retirement. If they're in mutual funds. x 1. depending on how the inheritance – and enter its estimated lump-sum money is invested.282 for 5% 173. Also consider 139. Personal savings and investments will depend on the real estate market in your Multiply these amounts by the savings community. But remember.290.) any personal property in which the value depends from the top of Worksheet C. your rate is When you have finished Worksheet B. Then multiply each of these next 10 years. If they're all in fixed income investments. the dollar amounts for your income sources directly suppose you have $10. from column 3 of Worksheet A. As with TOTAL ASSETS 13 14 . annuities. for investments. Home equity and pensions are not included since you most likely You can enter any estimated periodic won’t receive these sources of income until contributions (such as to your 401(k) or IRA) Market value of home retirement. Remember that you are only (enter as Security (and pension) benefits will mean a estimating the rate of return on this money Mortgage and liens positive amount) bigger check. over a period of years and that you will need to Estimating a rate of return on your home review your estimate from time to time.629 (rate of return factor for 5%) Other The rate you choose depends on what $16. such as monthly growth savings have extra money than too little.000 in a traditional IRA. you will be able to transfer As an example of a possible calculation. Your Money .00 (savings in 10 years) you've done with your retirement savings. starting with 401(k) and you believe it will earn 5 percent over the SEP-IRA and 403(b) plans. Estimated Savings Value of conservative in your estimates is safer. better to If you have other investments.741 for 3% 155. In addition to these sources. New Savings Between need to do some research to figure out past rates of Now and Retirement. Keogh In Worksheet B. This worksheet will IRAs (Roth) return as a guide for estimates for the future. Figure a low estimate for this and for growth factor for the rate of return you select Other assets (collections. past performance never guarantees future results. you'll go on to Worksheet C. how much they will grow to at the time of Like Worksheet A. allow you to take any additional workplace Retirement plan statements should indicate past and personal savings you can expect to add between now and retirement and determine Other rates of return. amount (Column 1x Column 2) Work-related retirement savings Today will let you take your current retirement include any money you can count on receiving saving sources and then figure out how much they in the next 10 years – for example. IRAs (traditional) predetermined.10 Years from of Worksheet B.

such as your tax status. to take all of your anticipated assets Column 2. $268. you may Home equity amount for Worksheet D is based on your pay at the need to live in your home for some time or use end of your career. such as your 401(k) plan. Realize that it takes into account the continued IRAs (traditional) able from your Social Security Administration (SSA) growth of your assets while you are withdrawing statement. If you receive your benefit as a lump sum. this monthly income that you can use later to compare calculation is a guesstimate. assets conversion income workplace 401(k) plan. provide immediate income.006653 for 7% have been selected but based upon the nature of that was abandoned for some reason. You should be getting a SSA statement ev. If you receive it as a x 0.) Social Security x 155.00 (savings each month) information. Monthly Income Over a 30-Year earn on those assets in the future and enter it in Retirement.005368 for 5% 0. Select an income conversion factor half of your retirement mystery. WORKSHEET D MONTHLY INCOME OVER A 30 -YEAR RETIREMENT Income Conversion Factors for Assumed Rates of Interest Worksheets A and B. take the totals for each Work-Related Retirement Savings $15. three different rates of return If you were in a traditional pension plan 0.) fixed monthly benefit. Also keep in mind that while the If you have a fixed pension from work. (enter as and whether you will get your pension in a lump Here is an example of the Worksheet D Mortgage and liens negative amount) sum or fixed monthly checks (see discussion in calculation: Chapter 5 describing these options to help you Personal savings and investments choose). you may want to use a different employer going out of business.005368 (income conversion factor for 5%) Other assets (collections.282 (rate of return factor for 5%) For those assets you tracked down for Worksheets B and C. the available from the Pension Benefit Guaranty Column 3 retirement from Worksheet C) (Column 1x Column 2) calculation would look like this: Corporation. fill in only Column 3. money to live on. Now move on to representing the rate of return you expect to 401(k) or 403(b) Worksheet D. like your your investments. etc. IRAs (Roth) ery year with information about your own benefit.004216 for 3% 0. add them together and enter them Pension benefits down your retirement assets and solving the first in Column 1. you will have a monthly income for the income you can rely on during retirement. $50.528. if you save $100 a month in a since these plans are federally insured. since things that with your anticipated monthly expenses in SEP-IRA impact your income. the worksheet includes your home equity. Remember. so it may not about the amount and start date of your pension. or some of the assets from its sale to purchase pension plan administrator can give you details Market value of home another home or pay for rent. you will still 1 2 3 rate of return. (See Chapter 6 for PBGC contact $100. and if you believe that Information about your plan and benefits may be (Column 3 from Worksheet B plus factor beginning at investment will earn 5 percent per year.000. will vary. Security benefits by using information readily avail.00 (401(k) account balance) put that amount in Column 1. Enter the results in the third column.40 (per month) 15 TOTAL ASSETS 16 . union.20 (savings in 10 years) source. In this worksheet. from both You are making great progress in tracking worksheets. Multiply Column 1 by Column 2 and from Worksheets B and C and convert them to a Keogh enter the result in Column 3. retirement. 30 years of your retirement. This fixed monthly Other You can fill in the box in Column 3 for Social income is used to simplify the calculations. we now add Social When you add up all of the numbers in SIMPLE IRA Security and pension benefits since it deals with Column 3. receive some (or all) of your pension benefits Accumulated Income Monthly As an example. Your employer.

to cover Chapter 4 will look at those expenses over a 30-year retirement and how you will be spending the and decide how inflation’s impact. worth and divide by 12 for an average monthly cost. Then in Worksheet F. take chance to look at Inflation. Many experts are now increasing that figure to 80 or over time. Retired people may find that recording their expenses will If you get a bill four times a year. Chapter 3 TRACKING DOWN FUTURE EXPENSES This chapter will start you on the road you will have some idea of whether the money you have Avoid get- saved will be enough to last. If monthly bills for one You will be looking other things you have always wanted to do. 70 percent of your preretirement income. Maybe insurance. Remember to include your spouse's expenses ABOUT WORKSHEET E (PAGE 19): periods: the day you retire 10 years from MONTHLY EXPENSES if you're married and the expenses of anyone now and over the approximate 30-year TODAY First add up current monthly expenses in “You will have a financially dependent on you. or use a guesstimate until you can look it up. This means inflation is a major factor in determining your expenses during your first year of retirement. which you will read about soon. Monthly Expenses in 10 Years. hobbies. means that dollar for dollar spending patterns your money will not buy as much next year as it does this those totals and adjust them for inflation to estimate year. how they will change over time and. In doing so. year's worth. you will need more money every year. in its simplest terms. you will lose part of your nest egg’s buying power. you can't don't have exact control inflation over this stretch of time. Worksheet E (Monthly Expenses Today). If you want a quick estimate of how much monthly income you'll need to cover expenses in retirement. but you affected by inflation. Early on. records of your spending. Inflation and Your Future span of your retirement. and divide toward medical expenses. In other words. costs. Don't include things like college tuition that total by 12 for an average monthly expense. like your heating bill. you will important clues to your spend less on work-related things like the exact amount you pay for car retirement mystery. for example. if your money is not earning more than the rate income you just calculated.” 90 percent. You will also have a chance to ting stuck on the toward a realistic look at your expenses look at your spending patterns and decide how details and giving up because you in retirement and how they will be they could change over time. These numbers are Your expenses will likely change If you don’t know as you grow older. that are one-time you'll spend more on traveling. it is likely that more of your budget will go numbers. add up a year’s specifically. add them up. figure on at least they could change of inflation. transportation and clothing. get a at your expenses today and estimating As you age. during two other time alter future spending patterns. how much money you will need in retirement since. You can always come back with more accurate item vary. After all. certainly can control what you spend. 17 18 .

or your Real estate Parking Pet-related costs family history includes. overall prices Housing Loans Health Care (continued) went up a whopping 13. In 1980. we've gotten used to Utilities Personal Care Entertainment low inflation overall—with a few glaring exceptions—over Electricity Hair cut Eating out the last decade. Monthly Monthly Monthly The only accurate inflation rates Amount Amount Amount are from the past. But Food (at home) Workplace retirement and personal savings Travel/vacations these are estimates. in 2002. which have risen faster than inflation Clothing Transportation Other over the last 20 years. and remember.6 percent. Worksheet F uses the Maintenance Other Noncovered items factor for a 3.5 percent. a serious Income (state and federal) Public transportation medical condition like heart Other property taxes TOTAL ESTIMATED MONTHLY EXPENSES Insurance Health Care (other than health) House Health insurance TOTAL ESTIMATED Life Doctor visits MONTHLY EXPENSES Car Hospital (health) Disability Medicine Long-term care Over-the-counter medicine 19 20 . and which some experts think will rise Taxes Car repairs and maintenance Gifts about 7 percent a year over the Gas Membership dues coming years.5 percent rise in prices for the next 10 years. Looking at the past shows how rates may vary Rent Credit card Vision widely. and they vary widely. they went up Mortgage (Including condo fees) Car Dental only 1. If you have. Heat Dry cleaning Hobbies Facing Down Internet/cable Gym Movies/theater Rising Costs Phones Other One exception to low inflation Water/sewer Charitable contributions rates is medical costs. WORKSHEET E MONTHLY EXPENSES TODAY You can't know and 1 1 1 can't control future inflation.

and long-term care. Premiums you ever imagined. an you live and the policy you choose. In fact. HSA is a savings account into which you can deposit month. While a health savings account (HSA). money for future use. condo fees. also might make you feel more financially secure. social. you may own home. an additional insurance you will be offered When You Retire? $2. Buying such a policy at a later age means To cope with these when you become 65.” Resources section on page 42 includes publications about percent of today's 65-year-old Americans will spend some future medical costs. because long-term care insurance is a are starting special health care savings therapy and some home health care. every year. Those who become plan can sign up for HSAs with some banks. In addition to Medicare Parts A and B. private insurance. (The averaged $203 a day for a private room. this type of With medical and housing costs such a big part of account is portable. see the manage these costs. be carried over from year to year. covers doctors' services. and could benefit paid and benefit to persons 65 and older. If you belong to a health plan with a deductible of at least $1. could consume all the money saved for retirement.) time in the future in a nursing home. To services have been developed to help plan for and learn more about health savings account criteria. The typical deductibles. outpatient Make planning Make planning for your future housing higher premiums. you can pay $55 to $300 a cooling costs are rising fast too. say $200. retirees. which in 2005 These accounts can receive contributions from small premium – around $37 a month in 2006 – those who join can get prescription drugs at a lower cost. One example is a new type of account. for annual premiums example. but also your new product and some policyholders may find the coverage funds at work. You can use the funds from an HSA to help offset on health care. Depending upon where health care. future expenses. Individuals who don’t belong to a workplace health of retiree income drug program (Medicare Part D). which is designed to help retirees buy Medigap policies for uncovered services like the cost of owning a home hasn't gone up as much as certain employees save for future qualified medical and dental and vision care and drugs.000 (for family coverage). By paying a about $2. Maintenance. 20 percent of retiree age 65 if your employer does not cover health care for choose. and physical well being. it is high in many regions. One of the more recent products developed is long-term care insurance.000. You should know that employer-provided health amount of the daily While Medicare is a great benefits for retirees might not be guaranteed. Where Will You Live for a 60-year old can be as high as Medicare Part B. and the money in your account can this program. such as the income will be spent on health care. prescription drug plan offered in their area. If you're considering a policy. many important part of your overall retirement strategy. on average. and things like physical and occupational needs one of your first priorities since where you live in get some advice. you will probably spend more on health care than If you are thinking about retiring early. some preretirees hospital care. and/or Medicaid paid for only about 65 percent of retirees’ overall real estate taxes.500 a year. it's no surprise that products and employer to another or if you leave the work force. in particular. separate from their Medicare Part B is about $88. it stays with you as you move from one a retirement budget. Essentially. Saving for nursing home care. Medicare. insurance eligible for Medicare Part A and/or Part B can join a down payment. An additional feature is the Medicare prescription As you age. In addition.000 (for individual coverage) or health care expenses. Medicare Part A covers hospital care only.000. Rising health care costs. designed for reasonably healthy older people. The current cost of retirement affects not only your income. given that at least 40 will be spent you. or even a family member on your behalf. your employer. often require a hefty 20 percent $2. and it goes up emotional. it be reduced or eliminated by your former protection against does not cover all medical costs – employer under some circumstances. and other approved entities.50 per month. retirement savings. the consulting firm of Hewitt have to buy health insurance until Medicare kicks in at vary by the features you Associates estimates that. In 1999. disease. and insurance are other costs affected by inflation. Independent living facilities. and then a monthly fee of companies. Home heating and retiree health expenses on a tax-free basis. you may be able to set up an HSA. copayments. It is an isn't what they need. inflation. you may want to look into other types of housing. “On average. which can protect retirees' assets by paying for medical care in a nursing home and sometimes in your 21 22 . Resources section.

4106 (3.5%) years adjusted for now (from monthly of 1.9672 Insurance Health insurance House Medicare Part B Life Medicare Part D Car Medigap Disability Doctor visits Long-term care Hospital Medicine 23 Over-the-counter medicine 24 . WORKSHEET F MONTHLY EXPENSES IN 10 YEARS (First year of retirement) 1 2 3 1 2 3 Total monthly expenses 10-year inflation factor Total expenses in 10 Total monthly expenses 10-year inflation factor Total expenses in 10 now (from monthly of 1. use 1.5%) years adjusted for expenses column in (except for health care) inflation (Columns 1x2) expenses column in (except for health care) inflation (Columns 1x2) Worksheet E ) Worksheet E ) Housing Loans Mortgage (Including condo fees) Car Rent Credit card Maintenance Other Food (at home) Workplace retirement and personal savings Utilities Personal Care Electricity Hair cut Heat Dry cleaning Internet/cable Gym Phones Other Water/sewer Clothing Transportation Taxes Car repairs and maintenance Gas Real estate Parking Income (state and federal) Public transportation Other property taxes Health Care For a 7% inflation factor.4106 (3.

change after retirement if you decide to sell your Vision Here is an example of the calculations you home and purchase something smaller or move Noncovered items will do in Worksheet F: to a region with lower housing costs. If you have a fixed mortgage or loan. However. you may $282.12 (cost of the same food basket in 10 years) find or put aside additional savings in Entertainment retirement. Other figure on at least Gifts Membership dues 80-90 percent of your Pet-related costs preretirement TOTAL MONTHLY EXPENSES income to cover ADJUSTED FOR 10 YEARS INFLATION (other than health) expenses. since your home mortgage will be paid at some point.5%) account for savings during retirement in order to simplify the calculations. increase your total expenses in your first year of your payments have taken into account the rate Health Care (continued) retirement. But remember.” TOTAL MONTHLY EXPENSES ADJUSTED FOR 10 YEARS INFLATION (health) 25 26 .4106 (3. You Hobbies may want to use that money (or other funds) as Movies/theater “If you want savings during retirement. However. it is easier to save now than it will be in retirement.4106 (inflation factor of 3. The worksheets in this booklet don’t $200.5%) years adjusted for MONTHLY EXPENSES IN expenses column in Worksheet E ) (except for health care) inflation (Columns 1x2) 10 YEARS This worksheet will show you how inflation can Note that for many mortgages and some loans.00 (amount spent on food each month today) Travel/vacations x 1. You will notice that Worksheet F has room you will not need to do the calculation for this Dental for some new types of health-related expenses many item. WORKSHEET F CONTINUED MONTHLY EXPENSES IN 10 YEARS (First year of retirement) 1 2 3 ABOUT WORKSHEET F (PAGE 23): Total monthly expenses 10-year inflation factor Total expenses in 10 now (from monthly of 1. For example. this may be Eating out one place where money will be freed up. whether to add to your nest egg for unexpected retirement a quick estimate. your mortgage expenses may retirees are likely to incur in retirement. of inflation. Charitable contributions emergencies or to plan for inflated expenses later in your retirement.

. you will have the chance to For example. find out the difference a year can make and the Especially if you have a five ways to close the gap and boost your shortfall. most people’s monthly income likely will exceed their expenses. expenses begin to exceed the monthly income. At the beginning of retirement. this chapter can comparison in dollars valued at the time of your retirement. Chapter 4. say 5 percent. After you cover increased expenses with your expenses during retire. Making the If this is your situation. ranging from $500 to $5. Building on the clues uncovered in the earlier worksheets. come up with your totals. ment and see if they match up.5 percent. how much more. depending on the ABOUT WORKSHEET G (PAGE 29): you need to save more for retirement type of retirement plan you have. The goal is to stay ahead of inflation. inflation rate. then expenses. By the end of you are 50 or over. your expenses will increase due to inflation. but after a decade or so. Enter amount of money they will need in Worksheet G is where all your prior work comes that amount in Column 4 of Worksheet G.” this worksheet takes into account that while you will have a fixed monthly income. Few people will have exactly the will Most people haven’t thought about how long their savings last in retirement or how much inflation will increase will have exactly by a value adjustment factor you select from Clue 3 (page 31). need in retirement. you can add INCOME AND EXPENSES and. addresses the impact of inflation by time on your money. retirement. And you are reducing your COMPARING PROJECTED taxes. and way to watch your nest egg grow is to make comparison of your projected income and expenses. Select the rate of return with a 0 percent the amount of inflation rate. figured the effects of savings plan through payroll deductions. If there's no retirement plan at work. is greater than the constant dollar value at the time of your retirement. When doing this income. Chapter 4 COMPARING INCOME AND EXPENSES Now you will compare your income help you figure how much more to save each month grow and can be used to over the next 10 years until you retire. Most will get a negative together. you will discover whether contributions. Worksheet G compares your anticipated income money they will figure – a gap – when they do the math. number of months in a 30-year retirement.. a dollar today is worth more than a dollar in 30 converting your anticipated cash flows into a add even more to your savings through catch-up years if the rate of return. learn how to grow your savings over Join the Club “Few people Start Worksheet G by taking the total monthly income calculated in Worksheet D and multiply it time.000. Realizing this now will allow you to save and invest any extra income in the early years of retirement so that it will 27 28 . if so. this work- This is the number you've been savings. the maximum contribution to your workplace keep in mind that the value of a dollar tomorrow is less say 3. and expenses over the 30 years of your retirement. If than a dollar today. The worksheet finally. be sure to read on to later in retirement. need to add to your investigated your assets and You probably know by now the easiest savings. Where will you find additional sheet will allow you to working toward as you've savings? Here are some suggestions for active see how much you may workers and retirees alike.and you will annual contributions to any IRA accounts you have. Then multiply this result by 360 – the over time.

factor.00/month retirement.00 Worksheet D.60 29 30 .536.60 (value of income over 30 years) .00 /month At retirement Inflation adjusted Value at Total value value factor retirement for at retirement x 1.” F.766. col 3 total.$ 40. page 25 Health Other than health Projected value of income less “As you set expenses Subtract line 2 from line 1 aside more money. page 16 $260. Subtract $260. 0% inflation) rate used previously or select another rate.8054 (5% rate of return.5% inflation) (see Clue 3) one month (Column 3 x 360 months) x 360 (months in 30 years) x 360 (months in 30 years) (Column 1 x Column 2) $98.5 percent inflation rate (used in Here is an example of how this works: Worksheet F) or select another that you believe Projected value of income: will reflect inflation over the 30 years of your $1.3691 (5% rate of return. For expenses other than health. For health.400.5174 (5% rate of return.20 $202.575.536. Use the 3.00 /month $700. the combination of savings and earnings will help Next move on to expenses in row 2.00 (value of expenses over 30 years) .80 Total projected income Total projected value of expenses: $301. WORKSHEET G COMPARING PROJECTED INCOME AND EXPENSES- ARE YOU PREPARED? Projected value of expenses: Health expenses Other than health expenses 1 2 3 4 $200. go to Clue 3 Column 4 from the corresponding total value of (page 31) to select an inflation adjustment value your projected income (Column 4). 7% inflation) x 0. use the 7 percent inflation x 0. 3.769.40 (shortfall) Total projected expenses Worksheet F. Multiply x 360 (months in 30 years) this result by 360 and enter it in column 4.$301. taking the total monthly expenses calculated in Worksheet the total value of projected expenses (“other than health” and “health”) over 30 years of retirement in close the gap.960.769. col 3 total.

however. you won't have to fully pay for a aside more money. especially if your finances in several ways.9309 1.5825 2% 0.766.3968 10% Additional monthly savings needed 3 $ (multiply line 1 x line 2) savings factor you select from the top of Worksheet H. 31 32 .8054 expenses and projected total value of income $ 1.4636 0% 0. especially for health care.00644 (5% rate of return) suggestions for active workers and retirees alike. based on the rate of return you If the result is negative.Work your contributions at work Number 2 .00578 for 7% 0. provides health insurance. the combination of savings The good news is that you don’t have or "deferring.6593 0.Work longer. CLUE 3 WORKSHEET H tm en t Fa c to rs ADDITIONAL SAVINGS e Ad jus NEEDED BEFORE RETIREMENT Valu ASSUMED RATE OF RETURN INFLATION RA TE 7% 3% 5% 0. don’t worry. act on it now. and earnings will help close the gap.1658 1.0000 1.4175 (IN 10 YEARS) Additional savings factors: 0. Each year." taxes until you withdraw the money at policy yourself.00716 for 3% 0. that it is difficult to For example: Five Ways to Close the Gap Information about 401(k) catch-up contributions is available $40. retirement planners advise contributing Staying employed as long as possible benefits your retirement The good news is that time is on your over the next 10 years.6589 0. Remember the effect of interest return you're comfortable with. And contributing more means postponing. If you work for a company that money grow in 10 years. also. to have a rough idea of where you stand than have $262.5174 0. while getting a rate of the maximum to your retirement plan. Remember. If your contributions are made by retirement savings more time to grow.3698 0.8642 5% 1. Multiply the growth of your savings lessens the amount you gap from Worksheet G by an additional need to save. ties in to your personal interests. A regular income could compounding and how it can work to make your long way toward matching up income and salary deduction. Each year Catch-up provisions for some retirement plans other opportunities.00644 for 5% 0.3125 3. Then you may be in a lower tax bracket. too. Worksheet to save the total amount of any gap between retirement. retire later no guesstimate at all.1661 0. Having an income gives your side.5% 0. Maybe you want a new career.6194 Gap between projected total value of 3% 0.1655 Additional savings factor 2 7% 1.6597 1 3.8638 0.6207 1. If project inflation rates.7517 0.6179 9% 2.3683 8% 1.0789 0.7520 1. almost painless. as you set expenses over 30 years of retirement.7524 4% 1. It is better. Just about think you will earn.6193 2. and the allow you to contribute extra amounts if you're over 50. your plan has a catch-up provision.40 (gap from Worksheet G example above) Where will you find additional savings? Here are some from your retirement plan administrator or on the Internet.7962 1.5179 1% 0. saving is easier to do and may seem mean more regular savings. x 0. one that to save today to make up the gap between the amount you invest will grow.3161 1.0000 6% 1. that far in the future. should go a employer contributes.54 /month to close the gap Number 1 .0000 0.3691 1. everyone will need to make up a shortfall in savings. Longer life spans and better projected income and expenses. You don't have to stay at your same job if there are H lets you figure out how much you need to start what you have and what you need.8640 (from Worksheet G) 1.9286 2. Socking away that amount of money Without exception.5821 0.

05 Financial planners say that preretirement years are investing their monthly checks may choose not to wait.678 Security retirement age. until he is 63.00 including real estate taxes.512.50 0. or who feel comfortable 6 $200/month $83. for example checking accounts. or $2. $1.992.Put your money where the returns are new car.80 $64. which typically have low interest Week tion $80 ium c ab le TV subscrip lifetime.255.05 leaving friends and your community. Preretirement is also the wrong time to give or "loan" g T h e G a p Closinl Savings At 5% Per Year Over 10 Year Number 3 . Their s Moving to a region with lower housing and living costs or earning power is usually far better than yours.05 the older you are when you start receiving it. his/her 33 34 . 10 $89.992. On the other hand.186 As a general rule.Cut expenses. CLUE 4 L ong W ay y tle Go es A :A Lit Saving: T R 10 YEARS A LY SAVINGS OVEF RETURN WITH DOING WITHOUT MONTH A 5% RATE O S REINVESTED ONSIDER COST ALL EARNING EXTRAS TO C monthly benefit would be reduced to $960. asset allocation and diversification of investments. 7 $200/month $89. Educate yourself about investing and consider paying Investing that $400 a month (an average 5-year car loan a professional to help you choose health mean many older people have the energy and payment) and getting a 5 percent return would put more than enthusiasm employers are looking for.20 equity loans and high interest credit card debt. boat.05 a full retirement age of 66 under Social Security.783.400 a year over 10 increasing Social Security by a certain percentage years.783.00 0. to collect his 4 $200/month $70.05 that moving includes its own financial expenses and means benefits. however. $44. If.474 about the same total Social Security benefits over your and money market funds. assuming a 5 percent rate of return and Regardless of the age you start receiving all earnings reinvested.80 factors that drove up the value of your current house.05 to a smaller place like a condo or apartment. of $40. retirees who are seriously ill. Keep in mind. Adding $200 a month. Many people find the social benefits car or buying a used one. Review the discussion in Chapter 2 about Prem longer period you will be receiving them.512. including home For example.70 0.50 YEAR START 0.05 to be and whether you can afford it. however.70 $70. ly dinn er for two @ $50 $12.269.998 Movie and pth If you delay retirement beyond the full Social twice a mon $30 $4.000. Now is the time moving to a smaller home can help narrow the savings gap. many people keep too much money in the wrong kinds of $200 $31. For example.0 5 The amount of your monthly Social Security benefit goes up 1 $200/month $54. or vacation home is not wise if you need to save.995. will also have driven up overall housing costs. a worker turning 62 in 2005 would have 8 $200/month $97. Financial experts say too age 70.000 in your retirement account. of working as important as the financial ones.483.281. Housing is a major part of 61-year-old man earning $60.05 the wrong time to take on large debts.30 everyone's budget so think carefully about where you want early Social Security benefit at 62 would receive an additional $54.483. but in smaller amounts to take into account the or return rates. Consider keeping your old CLUE 5 skills and experience.000 would more than double your money. who 5 $200/month $76.40 $59.241. early retirement will give you accounts. not to mention the $27.995.90 $76.241.690. a 2 $200/month $59.90 that person starts to receive benefits at age 62.066.00 0.80 0. savings accounts. o p c orn for two @ $32 $64 $9. ADD $44.000 in 2004 and eligible for his $49. Number 5 . The same Number 4 .90 0.05 3 $200/month $64. At full 9 $200/month retirement. big and little large sums of money to your children and grandchildren. remember to sign up for Medicare at age 65.000 a year by waiting 1 year.40 0. now or later? $200/month $4 9.269. to take care of your finances so you don't have to ask others to 0/Month Additiona YEAR END With $20 RATE Another option is staying in your community but downsizing bear the financial burden for your care later on. need the money immediately.870.90 however. Buying a $83.80 0. that same worker’s monthly benefit would be $1. By waiting until the right place for your money. you can earn retirement credits.30 0. that person’s benefit will be $1. to a starting retirement savings balance ticket Daily lottery (depending on date of birth) until you reach age 70.870. $40.Social Security. Social Security benefits.255.

"What's the big deal? I'll just withdraw money when I need to pay bills. retirement mystery that remains is start hearing from people offering their own strategies for Getting Your Retirement Benefits deciding how you are going to make managing your retirement money. Con artists will not hesitate to exploit your good manners. You may be thinking. may not be so clear. You will need a strategy. more information to strangers. such as 75 percent. Their taxes on and your financial bottom line as you near the end of your this income most likely you have done in this booklet is to working life. Don't be a courtesy victim. you will probably need to focus on easier to do. The only part of your your retirement. but some plans provide for complicated business opportunity. keep in mind has uncovered a gap between your income taxes to pay. usually your lifetime. If you select an option that provides for a It’s A Big Deal your retirement survivor benefit for your spouse. Don't give out any personal (especially for medical costs). Save mystery is deciding If you are in a traditional pension plan. were a lot simpler and a lot make sure your income will last a For now. throughout your lifetime. note that your monthly benefit will be reduced. Your tax situation. If doing the worksheets Take into account that you will also have world. invested will be earning you probably will be changing some You may also want to take a look income until you withdraw it. you do.” "Having a strategy" may sound like retirement is a battle or a percent of the retiree’s benefit. your benefit is paid in the form of an annuity – that is. unless they're qualified Solving your retirement mystery financial professionals and can be objective. money you take out of your retirement years. Or you can contact the your retirement them in your financial affairs. not potential swindlers! how to handle payments. Some may offer to double your money at no risk. Retirees are plan administrator directly for information about what your plan offers. a word of caution. typically monthly. you may and state. You need to plan a leave in. A qualified tax adviser can help here. for an extended period. your taxes in retirement. letters. Think long and hard about involving “Part of solving You can find out about your retirement plan payout options by reading your plan documents. and less spending will boost your confidence live on. through periodic courtesy for friends and family members. other options. Take the short tax quiz that the money you in this chapter to find out about minimizing have saved and retirement income and expenses. Part of solving your withdrawal at financial products and services that retirement mystery will be deciding how to handle your strategy so you pay less tax on financial habits over the next 10 could help build some financial security into retirement money. phone calls. including continual investing. both federal account and continue to grow the money you Because you're growing a nest egg. But first. has revealed that more saving frequently targets for scams. These people may be You may need to decide whether to take your pension or relatives and friends." Your parents may have done fine by simply cashing their monthly Social Security and pension checks to 35 36 . and emails. Chapter 5 MAKING YOUR MONEY LAST The point of all the calculations investing. adding to your nest egg and investing it wisely. The survivor benefit is typically 50 money. You will also hear from strangers in your retirement income last as long as your retirement plan benefit in a lump sum or in an annuity. In today’s lifetime.

you will receive a monthly check for a defined distributions. through periodic payments over a short period of time." and the formula for determining the amount amount. however. Can You Beat It? need to continue If you choose an annuity. The tax treatment of these payouts will be can be complicated. Your plan may provide an annuity track record. Inflation is a major threat to your financial future. be sure to put it in a tax-deferred account. review the terms of the annuity before you purchase it. An annuity provides a steady stream of what will you pay in related fees. Be sure you know what you’re buying – there are place to leave money you’ve invested for growth because start withdrawing tax-deferred money from retirement option or you may choose to buy an annuity with all or part costs involved in ending the contract. such as a 401(k) company may keep the you plan for increased health retirement plan plan. For example. make sure you realize the amount paid vary based on investment returns or is it fixed. but not from inflation. the loan has to be repaid. You will then have to decide how to invest what period or for life. Withdraw defined contribution however.) By doing so. That is Withdrawals: workplace savings retirement benefit can be why annuities are usually Which Pot? plan) later. Annuities come in many varieties. you do not remaining balance unless care costs in your later years. etc. make your family aware of your reverse mortgage. Also. for example. usually should withdraw from this pot of money earlier in milestone on the Retirement Timeline at the beginning of in a lump sum. is a good Be aware. If you are purchasing one.” your investment decisions. within 60 days to avoid paying high income assets such as an inheritance or the sale of your house. Like any investment. however. A Roth IRA. If you choose to take your benefit upfront. bracket. Experts say you need to continue investing and early years of retirement when there may be the temptation amount of the equity in your home. choose an insurance company with a good credit rating and already paid taxes on. This is helpful especially in the reverse mortgage – essentially a bank loan based on the inflation. the insurance term care insurance can help your taxable plan. this is a way to supplement your income and not have to leave your home. You can also buy an annuity with money from other retirement when you may be in a higher income tax this booklet. different. 37 38 . You may want to consult a tax could be the most money you've ever accumulated and make sure it lasts for the 30 years of your retirement. You probably have some personal you have less taxable income and possibly higher entirely at the time of your retirement or. will the “Experts say you expert for help. you should be trying to grow your remaining money to at investing and income that lasts throughout your lifetime and can provide Another way to make your money last is to obtain a least keep up with inflation. and your life. money (such as your automatically get your you have opted for a 401(k) or other benefit as an annuity. Keep in mind that if you die monthly check. savings included in your retirement nest egg that you've deductions due to medical expenses. so make it a consideration in heirs sell the house. The more you learn the withdrawals are not taxed. It can provide you with a to spend the excess income instead of saving it to make sure it is there in 20 to 30 years. but at a cost. Retirement experts say you accounts when you turn 70 1⁄2 years of age. Talk with the bank about any taxes due on these payments. Of course. when taken as a lump sum paid not recommended for those with a shortened life span. If you are in a sooner than expected. such as an IRA. (This is a of your lump sum benefit. As you're withdrawing money to pay your bills in retirement. it's better to beat adjustments for inflation. Keeping your money in accounts paying guaranteed interest rates will bank sees value in the loan. as in some plans. you will avoid tax penalties. however. If you can keep your house in good repair so the diversifying your diversifying your assets throughout your life. remember long. You are spending down the value of your home. When you or your assets throughout keep it safe. Like These withdrawals are called "minimum required taxes (the highest tax being 35 percent as of 2006) on the other annuities. the better. risks and rewards. Your survivor benefit. that the IRS requires you to such as 3 or 5 years.

In the next chapter. expertise. these are called “minimum required distributions. you will find several resources Good money managers.” That person may not they appear. There's even withdraw it at retirement. False. statements.000 for a single person and $32. the case.000 pertinent to your retirement mystery. Don’t let embarrassment or fear keep you from reporting kind of practice is routine. higher returns are accompanied by higher risks – risks you may well not want to take as you near retirement. Going It Alone Taxes & Recognize that anyone can claim to be a “financial Never judge a person’s integrity by how they sound or how consultant” or “investment counselor. they never dismiss your concerns. become an informed investor. True or False? “Be sure to ask to turn to for more information.” points to keep in mind when you make any financial decision: 39 40 . may want to seek the help of a professional. on speedy and satisfactory answers. for a couple. as in life. The most successful con artists sound Vs. After all.a sure sign of a scam. you may be able to come up with a strategy you contributed to your retirement plan? When you questions. There is a 50 percent tax penalty on amounts that the IRS requires to be taken out after age 70 1⁄2 and that questions. True. or the avoid anyone who need to catch up financially push you into any hasty guarantees performance on investment decisions. You can hire someone to True or False? suspected investment fraud or abuse. develop your strategy and manage your money for you. Good financial professionals are never pushy. Look for signs of excessive and your money. Contact the securities Above all. however. if it sounds too good to be true. the stock market. and do not be swayed by assurances that this software to help. and ability to keep your strategy more than $25. desperation. and avoid anyone who guarantees performance are not withdrawn when required. it Especially during the later years of your retirement. Take advantage of them. you included in your taxable income if. about their fees and charges and whether they are paid by commissions or for the sales of financial products. probably is. regular attention to when you're retired. Be wary of anyone who claims they can sell you a product that offers great reward without great risk -. Make sure you get economy. Remember all that pretax money Understand your investments and never be afraid to ask regular written and oral reports. In all legitimate investments. Social Security benefits are not sheltered from taxes. Retirement– have the special training.” references. Ask tough questions and insist changes in tax laws. There’s another road. the True or False? they claim membership. it is your money you are putting in their hands. Here are a few returns. or credentials extremely professional and have the ability to make even Getting Help True or False? necessary to back up the claim. with securities regulators and any trade groups in which Monitor your investments. and the companies they work for and with. you pay income taxes. in 2006 believe you have been dealt with unfairly. Be sure to ask questions. such as False. and on returns. for example. don’t let fear. A Few Words About Scams As you plan your retirement. and or unauthorized trading of your funds when you receive to minimize taxes and maximize income. In tax terms. This way you can make an informed decision. Ask about the flimsiest investment seem as safe as putting money in With a lot of study and Income taxes go away licensing and professional designations and check them out the bank. energy. get annuities and mutual funds. get references. too. A portion of your Social Security benefits is agency in your state as soon as you suspect a problem or In investing. when you may you have taxable income and Social Security benefits of Now that you have tracked down all the clues have less interest. you’ve almost solved on target. are required by law to be clear and open There are no tax consequences if you don’t start to withdraw your pretax savings at age 70 1⁄2.

maybe even gold. The (special site for women and retirement) You have the power to put some information available on the Web sites listed is rich in detail Retirement Planning and General Retirement Issues: and wide in scope.. But remember to protect your privacy by color. “Chart your Savings Fitness … A Guide to Your Money and Your Financial Future Top 10 Ways to Prepare for Retirement progress through In fact. medical costs.org and investing. Two done and fill them out again as your finances change..dol. DC 20002 Retirement wishes come true. In the next 25 years.wiser.) day on pension and Social resources. 475 North Martingale Rd. and to Periodically look back over the worksheets you have learn about survivor benefits and Medicare. 200 Constitution Ave. N. Your income gradually and maybe working longer. Department of Labor references are available from the organizations above and used to have high contrast and few You won’t be alone. Chart your progress through the next 10 years until retirement … and beyond. resources to help calculate your retirement benefits. unless you know whom you're dealing with..W. To reach all these sources. Washington. Inc.heinz. weren’t.org (Note: The Department of Labor does not (202) 737-0900 endorse one specific Web site over another.E. booklets.org was fixed and retirement was no paying attention to your assets and income. your telephone. retirement.” publications you may want to view or order: Understanding the Benefits What Every Woman Should Know 41 42 . pamphlets. and the public library. Get time on your side and get going...org mystery. such as your Social http://www. retirement into action a plan to close the income-expense gap and This publication is presented by: The following Web sites. or address. one in five Americans Employee Benefits Security Administration others that focus on retirement and savings issues.com/personalfinance/tools/ Web site: http://www. including http://www. you will find ways to http://cgi. Savings Calculators: a paycheck and the next In the following list of Web site: http://www.cnn. N. helping American workers succeed in a new Women and Retirement Savings kind of retirement has become the focus for a number of government agencies and organizations. IL 60173 http://www. Suite 1140. It mostly means putting Security number. Washington.gov/ebsa will need to work on a clear and realistic working and the next day you retirement plan during the next 10 years. and income management services are another the next Request copies by calling 1-866-444-EBSA (3272) http://www.money. That's a lot of people today who Web site: http://www. and other manage your money smartly now and during your later years. Schaumburg. telephone. DC 20210 choices: One day you were will be over 65. in your not giving out personal information.S. long-term care insurance. #600. use the The Social Security Administration Web site has online Internet.nasaa.choosetosave. Make Toll-free publication request line: 1-866-444-EBSA (3272) North American Securities Administrators Association. Chapter 6 TRACKING DOWN HELP FOR RETIREMENT R ESOURCES Like a black and white TV.gov/ebsa retirement. and developing a withdrawal strategy.com/tools discover more clues about retiring The Actuarial Foundation Security checks. Businesses selling What You Should Know About Your Retirement Plan products and services like annuities. One day you lived on sure you're one of them so your retirement 750 First St. planning for increased expenses.ssa. U.dol. saving (847) 706-3535 http://www.gov 10 years until source of information.actuarialfoundation.kiplinger.

View “Invest Wisely: An Introduction to Mutual Resource Kit.soa.aarp. Start with these two publications: savings brochure.org This is the site for the National Association of Personal Financial Advisors.sec. View the following two and a section on “Money and Work.pueblo.aoa. Medicare.org http://www. The and your first and most reliable resource for information on http://www. It includes information on billing.” program. The a menu of online “Investor Information” topics for consumer organization also distributes a free “Financial Planning reference. http://www. The Web site also includes retirement planning information.org Web site also includes a section on investor education.gov The Society of Actuaries Web site (see "Research and locating any money still in your account.S. Access” section) for a wealth of preretirement information. The Web http://www.” Department of the Treasury.cfp. Financial Decisions Phone: 1-888-OUR-AARP (1-888-687-2277) Making Your Money http://www.org/ including a fact sheet on reverse mortgages Literacy and Education Commission. Those http://www. Medicare & You 2006 Phone: (202)387-6121 http://www.medicare.ftc.napfa. The Actuary Magazine. You can also order a free copy Your Guaranteed Pension brochures warning consumers about scam investments. A recent addition to the Internet is this site sponsored by the http://www. http://www.pdf Last for a Lifetime: http://www.” 1-888-237-6275 Funds” and dozens of other titles.gov The Certified Financial Planner Board of Standards Web site How to Join The Securities and Exchange Commission Web site offers lets you look up a certified financial planner near you. appeals.consumerfed.ssa. This Web site is sponsored by the Financial foundation.mymoney.asp “Get time Browse the Web site of the National Endowment for pages view finances throughout life – from childhood to Topics from money to housing are included at this Financial Education (and especially the “Multimedia college. Department of Health and Human Services) site is Saving and Investing: disciplinary rulings against individual financial advisers.gsa. 6 Steps to Six-Figure Savings and Scams.actuarial The AARP offers a wealth of information. and has among publications on this site.S.gov/eldfam/eldfam.org American Institute of Certified Public Accountants.htm The Federal Citizen Information Center Web site is Publications") links to informative articles in the group's with DB plans will also find these two booklets The Federal Trade Commission’s site your portal to government information from car publication. U. the including this publication: term care. the retirement plans that the agency offers. You can Seven Life-Defining Planning for Retirement order a copy online. www.gov/ftc/consumer.nasaa.gov/prescriptionhelp/ Guidebook to Help Late Savers Prepare for Retirement www. http://www. Finding a Lost Pension View Reverse Mortgages: Get the Facts before Cashing in On http://www.pbgc. and retirement and estate planning.org Pension Benefit Guaranty Corporation can assist in http://www. of the Consumer Information Catalog at this site. an organization of fee-only comprehensive financial professionals.org Phone: 1-800 400-7242 Your Home’s Equity and others. 1-800-366-2732 43 44 .nefe.net/learn Medicare Prescription Drug Coverage: http://www. Future Focus: Your Guide to Financial its offerings the My Money Tool Kit. career. useful: includes over two dozen fact sheets and insurance to retirement savings.gov The Internal Revenue Service’s Individual Why You Need to Know For those employees who may have worked for a company Retirement Arrangements is one of several guides to About Annuities with a traditional defined benefit (DB) pension.gov/pub/irs-pdf/p590.gov http://www. and links to information on the prescription drug Consumer Federation of America’s Web site offers a free Protecting Your Finances: How to Avoid Investment Frauds get going.irs. Administration on Aging “Elders & Families” site. long- In addition to consumer fact sheets and studies.gov Getting Help: on your side Also view the following publication: http://www.360financialliteracy.org/investor_education/ The Centers for Medicare and Medicaid Services This site alerts readers to the latest money scams and to any (U.

Even Saving copies of all the worksheets will devoting just one hour a month will clarify the progress you are making allow more than enough attention to toward your retirement goals. Remember. you close any gap between the money If all this sounds a little daunting. that's an ideal time to update the reward for completing this infor- Worksheet A. will require that each mystery be And each time you add more to savings. develop your successful strategy. plan. 45 46 . savings. It will help you redo some or all of your why not make it now? calculations from time to time. Done well. WORKSHEETS FOR THE FUTURE You have seen These lighter colored versions will the following also make it easier to make extra worksheets copies as needed. (Worksheet H) frame – 10 years if we start now. So if you before. you have and the money you will need please don’t forget our generous time for retirement. mation should be a happy retirement Its abbreviated instructions will provide future rather than a beautifully drafted an extra level of understanding. And don’t forget to use your If you get a raise and add it to your trusty number 2 pencil. This additional collection will prove useful: extra set. solved a clue at a time. They appear anticipate needing more on some of the preceding than one pages. it will be as considered Do you plan to pay off a mortgage and accurate as it is erased and between now and retirement? This will dog-eared. Accomplishing such a goal also affect your worksheet calculations.

factor representing 3. then go on to add any other INSTRUCTIONS FOR WORKSHEET C personal savings and investments you have. You may well have additional workplace and IRAs (Roth) Don't add balances from your Social personal savings to add to your earnings between Security statements and from a traditional now and retirement. if you have one – save that for calculate potential growth using a savings growth Worksheet D. Worksheet C lets you Other pension plan. or 7 percent rate of return. SEP-IRA.) 5. NEW SAVINGS BETWEEN IRAs (traditional) including the cash value of life insurance and any NOW AND RETIREMENT valuable collections you may have. TOTAL ASSETS 47 48 . (enter as To get 10-year totals. SEP-IRA spaces provided. The result: the value of your new Other assets (collections. multiply the amount Mortgage and liens negative amount) This worksheet takes the total from Worksheet A and projects it into the future – specifically. savings accounts and traditional pensions are not included since you SIMPLE IRA in a bank. etc. you can take current savings in 10 years. if you have one) in retirement. Add up the money across each row for you and your spouse and write the total in column 3. Then add all the numbers down column 3 and write the total in column 3 at the bottom. be able to transfer the dollar amounts for your 401(k) or 403(b) Write down in this worksheet only the income sources directly from Column 3 of money you have today that you plan to use when Worksheet A. depending on how much you believe each Market value of home YOUR MONEY. INSTRUCTIONS FOR WORKSHEET A TODAY’S MONEY 1 2 3 Worksheet A lets you shine some light on the retirement saving sources and project earnings You Spouse Total money you will have to support yourself (and your on each of them during the next 10 years. Keogh. The next rows include savings in Like Worksheet A. 5. Social Security benefits IRAs (both traditional and Roth). you select. WORKSHEET A TODAY’S MONEY Instructions: Record amounts for yourself and for your spouse in columns 1 and 2. Multiply that number by the savings Keogh you retire. and the market value of your home. or 7 percent rates of Home equity INSTRUCTIONS FOR WORKSHEET B return. Other negative amount. 401(k)s Personal savings and investments day you retire. Include the balance on your 401(k) growth factor you choose and enter the new plan. and SIMPLE plans in the number in Column 3. How much money will you have? and other savings instruments by the growth factor By choosing a savings growth factor for a 3. won't receive these sources of income until Enter mortgage and other liens as a retirement. of the worksheet items will increase in value 10 YEARS FROM TODAY between now and the day you retire in 10 years. to the you believe you will add monthly to IRAs. You will Work-related retirement savings spouse.

WORKSHEET B WORKSHEET C YOUR MONEY.344 for 3% 1.) TOTAL ASSETS TOTAL ASSETS 49 50 . NEW SAVINGS BETWEEN 10 YEARS FROM TODAY NOW AND RETIREMENT Asset Growth Factors for Three Selected Rates of Return Savings Growth Factors for Three Selected Rates of Return 1.967 for 7% 139. etc.629 for 5% 1.282 for 5% 173.) Other assets (collections.085 for 7% 1 2 3 1 2 3 Current $ Asset growth Asset value Estimated Savings Value of value factor in 10 years monthly growth savings (from Worksheet A. etc.741 for 3% 155. Column 3) (rate of return) (Column 1x Column 2) savings factor in 10 years Work-related retirement savings amount (Column 1x Column 2) Work-related retirement savings 401(k) or 403(b) 401(k) or 403(b) Keogh Keogh SEP-IRA SEP-IRA SIMPLE IRA SIMPLE IRA Other Other IRAs (traditional) IRAs (traditional) IRAs (Roth) IRAs (Roth) Other Other Home equity Home equity Market value of home Market value of home (enter as Mortgage and liens negative amount) (enter as Mortgage and liens positive amount) Personal savings and investments Personal savings and investments Other assets (collections.

006653 for 7% MONTHLY INCOME OVER A 30-YEAR RETIREMENT 1 2 3 Worksheet D takes your earnings and savings For other assets. fill in only Column 3. Column 1 by Column 2 and enter the result in If you have a fixed pension (rather than. SIMPLE IRA Other IRAs (traditional) IRAs (Roth) Home equity Market value of home (enter as Mortgage and liens negative amount) Personal savings and investments Other assets (collections. If it is a lump sum. Unlike previous work. 401(k) or 403(b) approximate amount of your pension and tell you whether you can receive it as a lump sum or as Keogh fixed monthly payments. or 7 percent Social Security Security benefit and any payout from a traditional rate of return and enter it in Column 2.005368 for 5% 0. your pension monthly income for the 30 years of retirement plan administrator or union can give you the since things that impact your income will vary. those you tracked down in Accumulated Income Monthly assets conversion income over a lifetime and projects a monthly income – Worksheets B and C. a 401(k)-type plan). from both worksheets and enter the total in Column 3 retirement from Worksheet C) (Column 1x Column 2) year retirement period. enter that amount in Column 1 of the worksheet. WORKSHEET D MONTHLY INCOME OVER A 30 -YEAR RETIREMENT Income Conversion Factors for Assumed Rates of Interest INSTRUCTIONS FOR WORKSHEET D 0. Remember. etc. Column 1 of this worksheet. this is a guesstimate of your Pension benefits in addition to. add the totals for each item (Column 3 factor beginning at from Worksheet B plus the amount you will have to live on – during a 30. Then select an income sheets.) 51 TOTAL ASSETS 52 . or Column 3. Multiply Work-Related Retirement Savings pension plan. 5. this one adds the amount of your Social conversion factor representing a 3.004216 for 3% 0. if you SEP-IRA receive it as a fixed monthly benefit.

in Gas Membership dues addition. you will probably Water/sewer Charitable contributions want to add more accurate Clothing Transportation Other figures later. Others. include Taxes Car repairs and maintenance Gifts your spouse's expenses. add in those Income (state and federal) Public transportation expenses. While you may Heat Dry cleaning Hobbies want to guesstimate some of Internet/cable Gym Movies/theater these bills the first time you fill in Phones Other the worksheets. may not remain the Food (at home) Workplace retirement and personal savings Travel/vacations same from month to month and will require a calculation of your Utilities Personal Care Entertainment average monthly bill over a year's time. WORKSHEET E MONTHLY EXPENSES TODAY INSTRUCTIONS FOR WORKSHEET E 1 1 1 MONTHLY EXPENSES Monthly Monthly Monthly TODAY Amount Amount Amount Now that you know what your savings and investments are. like a heating bill. Worksheet E helps you Mortgage (Including condo fees) Car Dental calculate what you spend today. Still other bills may arrive Electricity Hair cut Eating out only quarterly. Other property taxes TOTAL ESTIMATED MONTHLY EXPENSES Insurance Health Care (other than health) House Health insurance TOTAL ESTIMATED Life Doctor visits MONTHLY EXPENSES Car Hospital (health) Disability Medicine Long-term care Over-the-counter medicine 53 54 . if anyone is financially Real estate Parking Pet-related costs dependent on you. too. Rent Credit card Vision Some monthly expenses Maintenance Other Noncovered items are easy to figure. If you are married. the Housing Loans Health Care (continued) next step is to move on to today's expenses.

4106 (3.4106 (3.9672 Insurance Health insurance House Medicare Part B Life Medicare Part D Car Medigap Disability Doctor visits Long-term care Hospital Medicine 55 Over-the-counter medicine 56 .5%) years adjusted for now (from monthly of 1. use 1. WORKSHEET F MONTHLY EXPENSES IN 10 YEARS (First year of retirement) 1 2 3 1 2 3 Total monthly expenses 10-year inflation factor Total expenses in 10 Total monthly expenses 10-year inflation factor Total expenses in 10 now (from monthly of 1.5%) years adjusted for expenses column in (except for health care) inflation (Columns 1x2) expenses column in (except for health care) inflation (Columns 1x2) Worksheet E ) Worksheet E ) Housing Loans Mortgage (Including condo fees) Car Rent Credit card Maintenance Other Food (at home) Workplace retirement and personal savings Utilities Personal Care Electricity Hair cut Heat Dry cleaning Internet/cable Gym Phones Other Water/sewer Clothing Transportation Taxes Car repairs and maintenance Gas Real estate Parking Income (state and federal) Public transportation Other property taxes Health Care For a 7% inflation factor.

This chart assumes an inflation rate of Entertainment 3.5%) years adjusted for INSTRUCTIONS FOR WORKSHEET F expenses column in Worksheet E ) (except for health care) inflation (Columns 1x2) MONTHLY EXPENSES IN 10 YEARS Health Care (continued) Inflation will increase your expenses. If you have a fixed mortgage or loan. Hobbies Note: Many mortgage and some loan payments have Movies/theater already taken into account the rate of inflation. even in the 10 years between now and retirement. Other Gifts Membership dues Pet-related costs TOTAL MONTHLY EXPENSES ADJUSTED FOR 10 YEARS INFLATION (other than health) TOTAL MONTHLY EXPENSES ADJUSTED FOR 10 YEARS INFLATION (health) 57 58 . Worksheet Dental F helps you calculate how much inflation might Vision affect each of the items in the expenses you Noncovered items recorded in Worksheet E. WORKSHEET F CONTINUED MONTHLY EXPENSES IN 10 YEARS (First year of retirement) 1 2 3 Total monthly expenses 10-year inflation factor Total expenses in 10 now (from monthly of 1. In addition.4106 (3. it includes room for some new types of health-related Travel/vacations expenses many retirees are likely to incur in retirement.5 percent for items other than health-related expenses and assumes a 7 percent inflation rate for Eating out health expenses. you will not need to do the Charitable contributions calculation for this item.

use a 7 percent inflation rate or select another rate. 59 60 . col 3 total Health Next. Then multiply this result by 360 months and enter that amount in Column 4 of Worksheet G. WORKSHEET G COMPARING PROJECTED INCOME AND EXPENSES- ARE YOU PREPARED? INSTRUCTIONS FOR WORKSHEET G COMPARING PROJECTED INCOME 1 At retirement 2 3 4 AND EXPENSES Inflation adjusted Value at Total value value factor retirement for at retirement This worksheet compares your anticipated income and (see Clue 3) one month (Column 3 x 360 months) (Column 1 x Column 2) expenses over the 30 years of your retirement and will reflect any shortfall between the two.5 percent inflation rate Projected value of income less (used in Worksheet F) or select another that you expenses believe will reflect inflation over the 30 years of your Subtract line 2 from line 1 retirement. col 3 total Worksheet D and multiply it by a value adjustment factor you select from Clue 3 on page 31. The result is the projected value of income less expenses. Use the 3. Multiply this result by 360 months and enter it in Column 4. Now subtract the total value of projected expenses (“other than health” and “health”) over 30 years of retirement in Column 4 from the corresponding total value of your projected income (also in Column 4). Total projected income Use the total monthly income calculated in Worksheet D. Worksheet F. This is your total projected Total projected expenses income. record the total monthly expenses Other than health calculated in Worksheet F. For expenses other than health. Select the rate of return with a 0 percent inflation rate. For health. choose an inflation adjustment value factor from Clue 3 on page 31.

Additional monthly savings needed 3 $ (multiply line 1 x line 2) 61 62 . Multiply the gap in Worksheet G by an additional savings factor you select from the top of Additional savings factor 2 Worksheet H. based on the rate of return you believe your savings will earn.00578 for 7% NEEDED BEFORE RETIREMENT (IN 10 YEARS) Now you can figure the amount you need to start Gap between projected total value of expenses and projected total value of income 1 $ to save today to make up for any gap between (from Worksheet G) projected income and expenses.00716 for 3% 0. WORKSHEET H ADDITIONAL SAVINGS NEEDED BEFORE RETIREMENT (IN 10 YEARS) INSTRUCTIONS FOR WORKSHEET H ADDITIONAL SAVINGS Additional savings factors: 0.00644 for 5% 0.