Prepping income for retirement

Just as they've revolutionized American culture, baby boomers will reinvent retirement. They are expected to live longer, play harder and - most telling, of all - many are also planning to work in some way in their later years. Not surprisingly, many are also worried about outliving their savings. With 76 million baby boomers heading toward retirement, it has never been more critical to plan for what lies ahead.

Here's a checklist for what you can do now to help position yourself smartly.

Health-care costs

We're going to live longer - but we're also going to require more in the way of health care. In your 50s, if not before, start thinking about long-term-care insurance, which may pay for nursing home and in-home care.

Also, factor the cost of regular health insurance into your retirement budget. One thing is for sure, it's not cheap. Health insurance premiums for a married couple can easily run upwards of $15,000 a year, according to Hewitt Associates' 2005 survey of national health costs. And remember that when you retire from your job, the insurance policy you walk away with, called COBRA, will expire after 18 months unless you convert the policy.

The bottom line: Do your homework to see what works best for you.

Have a small footprint

Be as trim as you can by paying off your debt and investing in capital expenses, such as energy efficiencies, that will reduce bills down the road.

And test-drive your retirement plan. Figure out what kind of lifestyle you want and how much it will cost - then live on that budget for a while. Most of your day-to-day expenses probably won't differ that much.

As for big-ticket items like travel or that yacht you've always wanted, be brutally honest about just how much you can afford. Also, be sure to build an emergency cushion into the spending plan you construct.

Real estate options

Do you want to live in Nevada, or move to North Carolina? This isn't a trick question. Real estate taxes can take a big chunk out of a fixed income.

Think hard about where you want to retire and the economic benefits that different regions bring to the equation in terms of real estate taxes and everything else that will add up to your cost of living. Also, if you're still working and own your home, now may be the time to get a loan to finance the second home you may be thinking about buying.

Consolidate accounts

A lot of people leave their 401(k) accounts behind when they job-hop. Before you retire, it's a good idea to consolidate your retirement accounts.

With everything in one place, you'll recognize whether you're overweighted in a particular sector. Perhaps, you'll want to start rebalancing into some fixed-income investments.

At this point, if you haven't developed a relationship with a financial advisor, it would be wise to do so.

Tapping your accounts

If you withdraw money from your 401(k) or Individual Retirement Account before you're 59, in most cases you're going to pay regular income taxes on it, plus a 10 percent penalty tax. After that age, you can take as much money out as you wish, though you'll still pay income taxes.

The glory of the retirement account is that your nest egg is growing at a tax-deferred rate. If you have to tap into any account, target your taxable accounts before you hit the tax-deferred ones. Also, be sure your beneficiary forms are up to date on your retirement accounts; the beneficiaries named will take precedence over what your will states.

Update and recalculate

Make sure you have a durable power of attorney, a living will and a will. It's also important to maintain an updated list of policy numbers and current contact information. (Our firm has a form called a "document locator" that lists a client's accounts and locations.)

Be sure to add all the passwords on your accounts to the form so that your designated beneficiary or trusted advisors can access information on your computer or other electronic devices. A copy of such information should be kept with a lawyer, a trusted relative or in a lockbox.

Everything in retirement begins with a plan. But plans are fluid and circumstances change; you'll likely have to change the plan you start out with. Recalculate on a regular basis. Are you in line with your projections?

What life events or circumstances have transpired that might have affected your thinking on retirement? And, remember, too, that it isn't only about the money.

Are you living the lifestyle you want? For more information on planning for retirement income, call me at 689-8704 or e-mail Have a happy Easter weekend!

Smith Barney does not provide tax and or legal advice. Please consult your tax and or legal advisers for such advice.

• William Creekbaum, MBA, CFP, a Washoe Valley resident, is senior investment management consultant of SmithBarney, a financial services firm serving Northern Nevada.


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