First up is a little advance planning. Think about what changes will make life easier for you 10 or 20 years down the road. If you’re a bit of a handy-man, now is the time to begin to make needed alterations, while you’re young enough to do the work yourself. If you don’t enjoy doing your own work or don’t seem to have the time now for some remodeling, now is also the ideal time when you have a full-time income to pay for others to make the changes for you.

Most of the changes you will need to make fall under the general heading of accessibility and mobility. Whether we like to think about it or not, our bodies aren’t as flexible, and we aren’t able to get around as well when we’re 70 as when we’re 50. A few adaptations can make life much easier.

If you’ve been thinking of remodeling the bathroom, now might be a great time. But instead of putting in that Jacuzzi or garden tub, with the high sides that are hard to get into and harder to get out of, consider something like the walk-in tub from Safety Tubs. It has adjustable power jets for a soothing massage, like a spa tub. But it also has a door in the side to make getting into and out of it much easier.

As a matter of fact, many older American’s find it very difficult to get into and out of a conventional bathtub safely. Garden spa tubs are even more difficult. Many older folks end up only being able to use a shower. A tub like the Safety Tub will be a Godsend if mobility or bending ever becomes a problem for you.

Stairs can be a problem, whether it’s 3 steps up to a front porch or living in a two-story house. I found this out the hard way about 10 years ago when I had knew surgery. I never did learn how to climb stairs on crutches. It made me realize how big a barrier stairs can be to those with limited mobility.

For a permanent solution to getting up and down the stairs, you can install a chair-type stair lift. Do-It-Yourself models start from $2,000 up, such as the Ameriglide. Deluxe models installed by professionals can cost thousands of dollars more. Installing a stair lift can indeed cost a considerable amount of money, but it’s a lot less trouble than moving from a two-story house you like to a one-story house just because you can no longer climb the stairs.

We’ll continue discussing practical changes you can make to your home to adapt it for your later years tomorrow.

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New retirement communities are still being developed in Florida and Arizona. Del Webb is now developing Sun City Festival in Arizona, a 3,000 acre site designed to eventually be home to 7,200 households. But now not only are retirement communities growing in Florida and Arizona, they are now popping up in other Sun Belt states like Texas and New Mexico. But what’s really amazing is the development of retirement communities in such northern locales as Michigan, Massachusetts and Illinois.

Several things are driving this trend. Many retirees want to downsize from the house where they raised their families. They simply no longer need all that space, so they’re looking for a smaller house. They like the amenities planned retirement communities offer.

At the same time, many folks have realized they don’t want to move half way across the country from their children and grandchildren, better weather or not. How much fun is being able to play golf in January if there’s a new grandbaby you only get to see once or twice a year because of the distance.

The booming real estate market of the last few years, particularly in the Northeast, has driven home equity up to all-time highs. But if you sell your house to capture the equity, where do you go when you buy a smaller house? People moving out of larger houses can afford to relocate to a planned retirement community, but in what part of the country?

Oak Point in Massachusetts is a great example of this new trend of Northeastern retirement communities. It has the community clubhouse and shuffleboard courts you would expect in a 55+ community in the Sun Belt. It has almost all the amenities you’d find in a Florida or Arizona retirement community except the weather.

But it’s not just shuffleboard and bocce ball. Since Oak Pointe is also designed for active seniors, you can wait for the snow to melt in the heated swimming pool and the state-of-the-art fitness center. You also don’t have to shovel the snow: the maintenance staff does it. It’s all included in the price. When you want some big city excitement, Boston is less than an hour away by car or bus. If you want a day at the beach, Cape Cod is also an hour’s drive away.

Especially for those with children in the area, and for those who enjoy the cultural amenities of the Boston area, retirement in the North makes great sense. Even a few folks who were living in the Sun Belt have now moved into some of these Northern retirement communities. Who could have imagined that a few years ago?

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It can be one of the best retirement investing strategies you can have, because it can pay huge dividends. It can open our eyes to the reality of living in a new place full-time. This is the kind of information you need to know before you spend serious money to ship your furniture cross-country to a new area.

Let’s say you visited Phoenix in the winter and dreamed of not having to shovel snow for days on end. I lived in Arizona for 5 years, and there is a lot to like about Arizona. My mother-in-law still lives there.

Winter is very pleasant in Phoenix. But are you ready for 120 degree days in the summer, when your feet stick to the pavement of asphalt parking lots, and the steering wheel in your car gets so hot from being parked in the sun, that you can get blisters on your hands from touching it?

Yes, I know you can buy a cover to keep your steering wheel cooler. But the point is, to fully experience an area you might be considering making a permanent move to, you need to test it out for at least 12 months first. Experience all the seasons, so you can see the good and the bad.

Some people love the heat in Phoenix. Some people spend the entire summer under an air conditioner and never go outside, at least in the daytime. If you like to walk for exercise, you’ll have to do it at 5am, like my mother-in-law, before it gets unbearably hot. Only you know what you like and what you can’t put up with.

So…before you make a permanent move, check out your new area by renting there for a year. Granted - it is extra trouble and maybe a little extra expense, but it can save you from making a very costly mistake. Get to know the neighborhoods and the city. Find out about development plans. You will be able to gather the kind of information you need to make an informed decision. If you rent first and then you decide not to move, you’ll still have your house back where you came from to go back to.

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Dale Carnegie tells the story of a speech given by Dr. William Osler, founder of the Johns Hopkins School of Medicine. Dr. Osler spoke to students at Yale on the secret of his success. He said he wasn’t smarter than the average person. Instead he said his success secret was to live in “day-tight compartments”.

Dr. Osler told how he had taken an ocean voyage back in the days of the great Atlantic steamships. The ship’s captain took Dr. Osler to the bridge of the ship and showed him how, with the pull of a single lever, he could activate machinery to close doors throughout the ship and divide the ship into watertight compartments. This was a great advance in making ocean voyages safer.

Dr. Osler urged his audience to take control of the machinery of their low lives and to divide their lives into “day-tight compartments” for the voyage through life. He said to seal off the dead past with its mistakes, and to seal off, for now, the future also, because the only time we can control is today.

Dr. Osler didn’t say not to prepare for the future. He said that the best possible way to prepare for the future was to concentrate on making today as productive and meaningful as possible.

That’s great advice for retirement planning and life in general. It works for retirement planning if you have 30 years left before retirement. It also works if you’re already retired. We need to make today the best day we can. We can’t change the past, and we can’t act in the future until we get there. Whether it’s retirement planning or any plans for the future, we can only act today to make tomorrow better. Like it says in the song, let’s resolve to live “One Day at a Time”.

Christy Lane

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Step 5 - Adjust for Social Security. You’ll notice I left a discussion of Social Security to last. Much has been written recently and much has been said recently, especially by politicians, about the future of Social Security. If you’re within a few years of retirement age, Social Security may be as close as it gets to guaranteed for you. If you’re in your 20’s or early 30’s, it’s anyone’s guess. That makes it a purely personal decision whether to take Social Security into consideration when making your retirement investment plans. Regardless, the math is simple. If you haven’t received a statement from Social Security recently showing your projected payments at retirement, you can call 800-722-1213, you can visit your local Social Security Office to submit a request, or you can go to www.ssa.gov/mystatement.

Let’s say that your payments are estimated to be $1,100 per month. Because of tax savings, that might be worth $1,300 per month of ordinary income. So if your calculations show you need $5,000 a month in income, you could reduce that to $3,700 per month or $44,400 per year. From Step 4, if your pension plan is going to cover $30,960, that means you have to save to make up the $13,440 difference. Once again that’s $13,440/8 x 100 = $168,000 as your savings goal. From the FinAid.org calculator, that would require saving $175 per month. Now this is beginning to sound very doable.

Finally, what about inflation? It does reduce the buying power of your dollars in the future. We already adjusted for inflation in using only an 8% real return after inflation rather than the 13% you often hear quoted for the gain in stocks over the last 50 years, which does include inflation. Still if your pension plan payments are fixed once you retire, the value of your payments will be less each year. So to be conservative for inflation, you can reduce the value of your pension plan payments by 30% when you do your calculations.

There are 2 other simple ways to do address inflation. First, the calculations in the steps above are based on building up money in a 401(k) plan or other tax deferred investment program. The calculations shown in the example are also based on drawing out interest and leaving the principal alone. 401(k) plan rules require that you begin drawing out money by the time you’re 72, if you haven’t begun already. Withdrawing some principal will help cover some of the cost of inflation.

Second, you can always adjust for inflation by using a lower rate of return than the 8% we used in our example for your own retirement savings plan calculations. It’s not an exact science. No one can predict the rate of inflation for the next 10 or 20 years with any degree of certainty. We can only predict trends for the future based on the past. So use prudent judgment and adjust the assumptions for how conservative you want to be.

Finally, what do you do if your calculations show you need to save say $500 a month, and you can only save $200 a month? What you do next is critical! Don’t put off getting started until you can afford to save the entire $500 a month! If you put off saving until you can afford it some time in the future, that time may never come, but retirement will eventually come. So - whatever amount you can put aside, get started today!

I hope this brief series has been helpful. Any comments or thoughts you have are certainly welcome and will be appreciated.

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Step 3 - Determine how much you need to save. Let’s say you currently earn $86,000 per year and have determined you can live on 70% of that or $60,000. To determine the amount of money you need in your retirement savings account by the time you retire, calculate how much it would take to earn $60,000 a year in interest at 8%. The math is simple. $60,000/8 x 100 = $750,000. Next determine how much you will have to save over the years between now and the age you plan to retire to reach your $750,000 goal.

If you don’t have a financial calculator handy, you can go to one on the website of the good folks at FinAid.org. Just click on the handy calculator at www.finaid.org. This particular calculator says it was designed to calculate how much money to save for college, but you can use it to calculate how much you need to save for any financial goal. For the sake of this example, I plugged in $750,000 as the goal and 25 years left before retirement and 8% return. In this situation, it says we would need to save $783 per month. That’s a hefty sum. Let’s see if there are ways to reduce that monthly savings amount.

Step 4 - Adjust for company or other retirement or pension plan payments. You need to adjust the amount you will have to save each month by taking into consideration any retirement or company pension plan payments you may be entitled to. Fewer and fewer companies are offering a defined benefit plan, where you are guaranteed a certain monthly payment. However many still do, usually tied to your number of years of service.

Let’s assume for this example that you qualify to receive 1.2% of your final salary, and that you will be on the job for 30 years when you retire. That’s 1.2% x 30 x $86,000 = $30,960 per year. That means you will have to cover the difference between $60,000 and $30,960 or $29,040 yourself. Applying the same math at 8%, that’s $29,040/8 x 100 = $363,000. Using the calculator on FinAid.org, that’s $379 a month in savings to reach that goal in 25 years.

Tomorrow in Part 3, we will look at adjusting for Social Security and inflation.

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In these steps, I’ve kept the math in the example simple to make the process easy to follow. Some folks have written entire books on this subject, and they make excellent reading when you’re ready to get into the process in detail. First step through the process in this simple example and then go into greater detail by doing a little research on your own when you are ready to set up your own retirement savings plan. The important point is - don’t delay getting started until you understand every complex twist and turn of the tax laws and all the investment options. That’s what the pro’s are for. Begin by understanding the basics and then get started. As a friend of mine says about any worthwhile project “It’s more important to get it going than to get it perfect”. So in the famous words of Nike - “just do it”.

Step 1 - Determine how much income you will need to have a comfortable retirement lifestyle. The old rule of thumb many investment advisors recommended was 80% of your current income. However, that’s a very general guideline. You really need to examine your own situation for a better number. Is your home paid for, or will it be paid for when you retire? Then you won’t need money to cover a mortgage payment. If you and your spouse are driving 2 cars now, will you cut back to one car? That’s one less car to maintain or eventually replace. If you currently live in a large house, will you be moving to a smaller house? That’s less for utilities, and the proceeds from the sale of the larger house can go into your retirement account. You’ll also have to factor in that you will have new expenses you didn’t have before. You may need to buy more medicines as you get older. If you have a health plan from your current employer, your share of the cost may go up. You will also probably want to buy Medicare insurance to cover your share of medical costs not covered by Medicare.

Step 2 - Determine what rate of return you believe you can get on your retirement savings. There are many references out there on what rate of return to use for retirement planning. Let’s try to keep the math simple. According to a research report prepared for the Social Security Advisory Board in 2001, the average real rate of return for stocks from 1946 to 1998 was 7.8% after inflation. That seems like a good time period to use because it avoids the Internet boom and bust between 1998 and 2002. This is 7.8% in real, not inflated dollars.

Of course, 7.8% is truly an average over time. In some years the stock market has done very well. In other years, it has taken a big slide. It can be very hard to predict a rate of return over a short period of time. So for the sake of simplicity, let’s round the 7.8% up to 8%. For your own planning, if you want to be more conservative, you can always use an even lower rate.

Tomorrow in Part 2, we’ll walk through some simple calculation to determine how much you need to save to provide the monthly income you need.

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* Retirement Planning
* Different kinds of Retirement Saving Accounts
* 401(k) Accounts
* Borrowing against retirement savings
* Finding money to invest for retirement
* Dollar Cost Averaging

I’m not a CPA or tax attorney or lawyer. So don’t treat what I’m saying as some kind of tax or investment advice coming from a professional. I’m just a person who’s being doing a lot of reading lately, and I think I’m beginning to understand some of this stuff. I trust that putting down on paper what I’ve been reading will also help me clarify my own thoughts. For professional advice, you should see a CPA or other tax or investment professional. That’s what I do. I learned to hard way to use a CPA for my taxes after I got audited a few years ago and found out I had managed to get confused on a few things when using do it yourself tax software.

But then life, and retirement, is not all about money, so I plan to write about other things also. I’ve been reading a lot about retirement lifestyles lately, things like selecting a retirement community and staying healthy in your retirement years.

I plan for this blog to be a useful place to post what I’ve learned, and I also want it to be a place where you can also share what you’ve learned, and what you’ve been thinking about retirement and retirement planning. If you’re already retired, I’d love to have you share your thoughts also. Right now retirement is still in the future for me so all my thoughts are theoretical. If you’re retired now, I’d love to hear about the reality of retirement.

To start with, I’ll be posting a number of topics on the financial side of retirement and retirement planning, as well as links to news articles about retirement. After that, I plan to discuss retirement communities and other options – things like should you move when you retire, or would it be better to stay where you’re living now. After that, we’ll see where it goes from there.

Please feel free to comment, and I hope you enjoy it. You can follow the series by checking back in here often.

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