Nurturing Your Investment

As the Baby Boomer generation begins to retire in record numbers and medical advances allow them to live longer and healthier lives than previous generations, retirement income planning has emerged as a relatively new and largely untested area of financial planning.

For those approaching and entering retirement,
The Hartford recommends that boomers think of themselves as farmers, tending their “retirement income garden” to make the prospect
of retirement less scary.

Boomers may not realize it, but for years they have all focused on growing the garden or compiling all of the various assets that can be used to fund their retirement. These include obvious retirement assets such as 401(k) plans, defined benefit plans and Social Security as well as less obvious ones, such as embedded equity in a home. When retirement comes, it’s important to be very diligent in tending this garden, drawing from multiple sources to finance your retirement lifestyle while continuing to plant new crops when possible.

Three simple steps can help Boomers visualize the retirement income garden and how they might tend it:

Plan Your Harvest: According to the Employee Benefits Research Institute, 69 percent
of Americans say that saving for retirement is their number-one goal, yet only 42 percent have actually done a calculation to estimate the cost. Too often people think of a number which, if reached, will assure a comfortable retirement. Is one mi1 million dollars enough? Is it too much? This really depends on the withdrawal rate and what kind of “crops” are planted. It’s important to think about how much will be needed to live on in retirement and what will be needed to produce that income, as opposed to an arbitrary lump sum.

The amount that can be withdrawn from personal savings each year for retirement should also be balanced with other sources of guaranteed retirement income such as Social Security and defined benefit pension plans.

Rotate Your Crops: Many people seem to understand the concept of diversification for
growth, but how many understand diversification for income? A successful garden typically has a variety of crops and it’s not necessary to rely on just one or two. A retirement income should come from multiple sources, such as a 401(k), IRA, Social Security, pension plans and even equity from a house. Diversifying the income stream at retirement can protect a retirement paycheck should any one income source fall on hard times.

Tend, Tend, Tend: Like a well-tended garden, the retirement income portfolio should be fertilized and weeded on a regular basis. As people age and their needs change, there may be a need to transition into new products, such as guaranteed income
annuities or longevity insurance, to help offset the risk of running out of money in retirement.

Similar to a retirement plan, a retirement income plan should be monitored on a regular basis to assess progress and make any changes as needed.

In summary, when approaching retirement, thinking like a farmer can help build and maintain a successful retirement income plan. And, by all means, don’t go it alone. Seek the help of a qualified financial professional. You should also do your own research. Web sites such as The Hartford Investor (www.hartfordinvestor.com) have great retirement calculators and educational tools.

GETTING YOUR FINANCES BACK ON TRACK
Spending some time searching for ways to resolve unpaid holiday debt can be a credit to you and your credit rating.

“Paying off holiday bills is a good idea for getting the year off to a positive start,” says Gary Rippentrop, CEO of ACA International, the Association of Credit and Collection Professionals.

If you overspent during the holidays, these steps can help you get financially back on track.

• Know what you owe. Contact your credit card company to find out exactly how much you owe. Waiting for the bills to arrive in the mail could put you further behind and you will lose valuable financial planning time.

• Commit to a repayment plan. After assessing your outstanding debts, establish a system for paying them off. Create a realistic budget and repayment plan and save as much as possible for paying off your bills.

• Pay your debts quickly. Pay off your holiday debt as quickly as possible. Paying more than the minimum required payment on your credit cards reduces the amount of time needed to pay off the balance, lowers your interest costs and will result in considerable savings in the long term.

• Work with creditors to resolve any debts. Work directly with your creditors or collectors. Discuss options regarding interest rates, fees and other expenses with your credit card companies.

• If debt collectors contact you, don’t avoid them. Being contacted by a debt collector causes some people to panic and avoid working with the collector. The fact is, most debt collectors are well-trained professionals who work with people to get their accounts paid.

• Plan ahead. Consider this year’s holiday charges as a learning experience and resolve to do better next year. Calculate the total amounts you spent during the last holiday and estimate how much money you will need for future holidays. Then, establish a 2006 holiday savings account. “If you are confronted with the challenge of paying off holiday bills, don’t ignore them,” adds Rippentrop. “While collecting past-due accounts
is our business, helping people solve their financial problems is our commitment.”

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