I realize that I’m a day late and a dollar short with this particular news, but last week’s issue of Newsweek (April 17th — the one with Katie Couric on the cover) has an article by Jane Bryant Quinn about retirement called “When Your Paycheck Stops”. With longer life spans in our future, many of us will need to save even more than our parents and grandparents in order to meet the needs of the future.

Quinn recommends the following steps:

  • Figure out what you can spend — Don’t think that you can “front-load” retirement, spending more early and less later. Develop a budget, separating needs from wants. (This is no different than budgeting for your current lifestyle.) Financial planners recommend that you draw no more than four percent of your at-retirement savings every year. Use this figure to determine your savings target.
  • Redo your investment plan — When you near retirement, shuffle your investments. This is a fairly common bit of advice. Young people should invest more aggressively; they can afford risk. Older people need to be more conservative with their investments. Mutual funds are a good choice.
  • To roll or not? — This topic is too complex for me to discuss here. Essentially, Quinn discusses the choices one faces upon retiring from a company: Should you roll your 401(k) into an IRA? Should you do something else? Check out the article for more info.
  • Tap your house for cash — Ask yourself if you really need the house you currently own. Could you get by with something smaller, something less expensive? It may be possible to sell your home and use the equity to buy something smaller outright. Quinn also suggests that reverse mortgages may be good choices for some.
  • Cover the cost of care — If you can afford it, you ought to consider a long-term health-care plan, especially if your family has a history of certain diseases. “[The couple] bought a joint long-term-care insurance policy. They’ve both seen dementia in their extended families, and don’t want to impoverish each other if one of them becomes ill. These policies aren’t for people with modest incomes (you can’t afford them) or for the supperrich. They’re for people in between…”

As I say, this issues is a week old and no longer available on newsstands. Your public library will have a copy, though, and the article is available online.

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