The Top Ten Ways to Prepare for Retirement

Planning for retirement, usually a major financial concern for those over age 40, has become even more prevalent now that the huge postwar baby boom generation is moving through middle age.

Various surveys indicate that preparing for retirement already ranks as a primary financial goal. A recent survey of mutual fund shareholders showed that 40% ranked retirement planning as their most important financial objective, and two-thirds considered it "very important."

The studies reveal that people not only look forward to retirement, but many also expect to retire early. In addition, retirees are apt to live longer as improvements in health care extend life expectancy. People retiring at age 60 today are expected to live another 25 years, or more than half of the length of their working careers. This makes the challenge of accumulating enough money for retirement even more difficult, since these savings may have to last longer and there will be less time to earn them.

While it's clear that retirement planning has become a leading financial goal, the big question is whether people will be financially prepared to retire when they want to.

1. Know your retirement needs.

Retirement is expensive. Experts estimate that you'll need about 70% of your pre-retirement income- for lower earners, 90% or more - to maintain your standard of living when you stop working. Understand your financial future.

2. Find out about benefits.

Contact the appropriate government department of labor/human resource office in your area to obtain details on payment rates.

3. Learn about your employer's pension or profit sharing plan.

If your employer offers a plan, check to see what your benefit is worth. Most employers will provide an individual benefit statement if you request one. Before you change jobs, find out what will happen to your pension. Learn what benefits you may have from previous employment.

4. Contribute to a tax-sheltered savings plan.

If your employer offers a tax sheltered savings plan, sign up and contribute all you can. Your taxes will be lower, your company may kick in more, and automatic deductions make it easy. Over time, deferral of taxes and compounding of interest make a big difference in the amount of money you will accumulate.

5. Ask your employer to start a plan.

If your employer doesn't offer a retirement plan, suggest that it start one. Simplified plans can be set up by certain employers.

6. Start your own Retirement Savings.

You can put money aside and delay paying taxes on investment earnings until retirement age. It's never too late to start.

7. Don't touch your savings.

Don't dip into your retirement savings. You'll lose principal and interest, and you may lose tax benefits.

8. Start now, set goals, and stick to them.

Start early. The sooner you start saving, the more time your money has to grow. Put time on your side. Make retirement saving a high priority. Devise a plan, stick to it, and set goals for yourself. Remember, it's never too late to start. Start saving now, whatever your age.

9. Consider basic investment principles.

How you save can be as important as how much you save. Inflation and the type of investments you make play important roles in how much you'll have saved at retirement. Know how your pension or savings plan is invested. Financial security and knowledge go hand in hand.

10. Ask questions.

These tips should point you in the right direction, but you'll need more information. Talk to your employer, your bank, your union, or a financial advisor. Ask questions and make sure the answers make sense to you. Get practical advice and act now.