Saturday, December 12, 2009

Planning Early Retirement | for Those Not Named Tiger Woods Submitted by Jim Roche NJ

"Flying by the Seat of Your Pants" might have worked just fine while you were employed, but ignorance or mistakes in early retirement planning can cost you dearly. Retiring early, choosing the wrong investments, withdrawing too much money or failing to plan for health-care costs can all turn your golden years to brass.

Although there is no guarentee you'll avoid unpleasant surprises if you plan -- but you can probably tip the odds in your favor. Here's a checklist to get you started. (As you get going, your Retirement Planning can help you make sure the numbers add up.)

10 years out
Think about where you'll live. Demographic surveys show most retirees "age in place," meaning they continue to live in the same house, or at least the same community, as when they retired. But downsizing or moving to a cheaper community can help your retirement assets last longer. Since where you live has a strong impact on your expenses, you'll want to consider your options carefully.

The Sabols, for example, had equity worth more than $225,000 in their New Jersey home. If they sell and move to the Florida condo they own, they could add that equity to the $350,000 already saved in their retirement nestegg. If they stay put for a few years, by contrast, the Sabols would have to keep paying their mortgage and other home expenses -- a difference of $2,000 or more in their monthly costs.

Imagine what you'll do. Some people don't think about how they'll spend their time in retirement until they wake up jobless. That's a bad idea psychologically as well as financially.

Retirees who fare best are generally the ones who have absorbing interests to pursue, said Ralph Warner, the recently retired author of "Get a Life: You Don't Need a Million to Retire Well" (Nolo Press). Those who wait until retirement often find themselves casting about for something to do, and may discover that the hobby or pastime they thought they would love isn't quite so engaging when they can indulge it full-time. As Warner says, "There's only so much golf you can play."

Speaking of golf, your activities in retirement also influence how much money you'll need. If you want to play the finest courses or travel the world, you'll need to save more than if you like to play canasta and visit relatives.

Boost your retirement contributions. If you're not already taking full advantage of your 401(k), IRA and other retirement options, now's the time to increase your contributions. Use MSN Money's Plan for your early retirement planning to see if you're on track, and try your calculations using different life expectancies. Your chances of making it to age 90 or beyond have never been better; many financial planners now use age 95 as their default life expectancy.

Consider paying down your mortgage. If you still have some cash left over after paying off your other debt and maximizing your retirement contributions, think about getting that mortgage retired before you do. Having the house paid off helps many retirees sleep better at night. Not having a mortgage also means you may have to draw less from your retirement accounts, allowing them to grow tax-deferred longer and reducing your overall tax bill.

It is never to early to learn how to retire. Start today check with your employer to see if they offer any early retirement incentive programs. In the next installment I will cover retirement planning with 5 years to go before retirement.

Jim Roche of NJ has created The Early Retirement Planning Forum for you to visit join and post all of your early retirement planning tips as well as provide information and resources for those wanting to retire early, or just what is necessary for you to know how retiring early can become a reality. .

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Jim Roche NJ

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