Poor Financial Planning Can Tarnish Your Golden Years

Small-business owners and their employees can utilize easy online retirement calculators and Social Security to prepare for life after work.

Poor Financial Planning Can Tarnish Your Golden Years

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Sometime in the future, you’re thinking, you’ll pass the business along to the next generation and go fishing. Sounds wonderful! How will you get there?

Planning for retirement can seem overwhelming, but it doesn’t have to be. Start early, take it in small bites and keep at it. You’ll be pricing bass boats before you know it.


Collect the Data

Start with information gathering. Pull all your (“your” means belonging to you and your spouse) financial information together: life insurance policies, bank accounts, retirement savings plans, your most recent Social Security income statement, mortgage information, pensions, and the last couple of years of tax returns — personal and business.

Include any divorce decrees, marital settlement agreements or child support agreements you or your spouse are a party to, as well as basic information about your children (dates of birth, college plans, any insurance policies or savings accounts you have for them) and a short comment about circumstances particular to your spouse or children (special needs children, a spouse who is much older or younger than you are, children with a broad age span from oldest to youngest).

Last but not least, you need a copy of your will and power of attorney, the articles of incorporation or partnership agreement for your business, and your financial statements for the last couple of years.


Contemplate Your Future

Next, talk to your spouse about your mutual expectations. Buy an RV and see the United States, or move next door to the grandkids? Work at something different? Volunteer?

Don’t take the answers for granted. Better to find out now that you have different ideas about retirement than after you’ve sold the business to your foreman and applied for Social Security benefits.

Other questions: How much longer do you want to work? Do you have significant personal debt? Are you expecting to pay for your children’s college education? How healthy are you?

Of course these answers can change over time, but thinking about them as early as possible will help you keep track of where you want to be, where you are and how to adjust as your vision for the future changes.


Make Some Projections

Then look at projecting possible outcomes. Here’s where the web can help. Choose a calculator, enter your specific financial information and some personal data, and you’ll get a report.

As with any calculator, the old adage “garbage in, garbage out” applies. If the calculator only asks a few questions, you get basic information with limited applicability. Try several calculators and think carefully about the information provided.

The Social Security Administration’s website (www.ssa.gov) gives the complete picture of the government retirement benefit, including helping figure out how much you’re projected to receive at full retirement age. (If you were born between 1943 and 1954 it’s age 66; for those born between 1955 and 1960, the age rises by a few months each year until it’s 67 for those born in 1960 and after.)

Create an account and you can get a personalized statement based on your record of Social Security earnings that will tell you exactly what you’re projected to receive, or just take a quick look for a rough projection based on your last couple of years of earnings.

Social Security sends you a paper statement every five years, but you’ll get current data if you create an account, and you can check it any time.


Help Is on the Way

You can find lots of information to help as you sort out your plans for retirement. Some are fairly simple, others more sophisticated. Each has advantages and drawbacks.

For basic projections:

No-load mutual fund company Vanguard, (www.vanguard.com) on its personal investors page, offers a variety of planning calculators, including a basic “When can I retire?’’ simulator and worksheets for retirement income and expenses. Discount broker Schwab (www.schwab.com) offers a simple calculator. AARP’s (www.aarp.org) calculator winds up with a handy graph with green for your money and red for any expected shortfall. It also allows for changes in expected savings withdrawals and amounts of preretirement savings.   More details, but still free:

Discount broker Fidelity (www.fidelity.com) allows for detailed expenses, various scenarios including retirement work, Social Security estimates/override, tax calculations, and you can also save your data.

A deeper dive at a cost:

Flexible Retirement Planner (www.flexibleretirementplanner.com) works on Java, the web, Windows, Mac and Linux. A personal edition is available for as small a donation as $20.

OnTrajectory (www.ontrajectory.com) is web-based and allows you to track progress and view your history, for a fee.

Other Helpful Resources

Laurence Kotlikoff’s book Get What’s Yours is a guide to maximizing your Social Security benefits — especially useful if you have complicated personal circumstances such as a disabled family member.

Jane Bryant Quinn’s recent book, How to Make Your Money Last, is full of practical, straightforward explanations of the financial world, both pre- and post-retirement, and of financial products from the basic to the arcane. She also includes extensive information about Social Security — claiming it and maximizing it.

Also consider booking a session with a fee-only financial planner. These are people who do not sell financial products of any kind and thus have no built-in bias for a specific company’s products.

Expect to pay around $350 an hour for their time, which might sound steep, but consider: They have no hidden agenda. You give them information regarding your resources and objectives, they give you recommendations.

The National Association of Personal Financial Advisors (www.napfa.org) has an advisor search function and explains the qualifications necessary for a planner to make that list.


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