Financial Planning

Exercise. Diet. Medical checkups. Keeping physically fit requires a healthy balance of lifelong practices, common sense and willpower — the same holds true for financial fitness.

An average American man who is 55 today can expect to live another 25 years and women, 28 more years, according to the Social Security Administration. That means decisions about housing, lifestyle, investments, insurance and legal matters today will have long-term implications.

About one third of Boomers plan to earn an income part-time after they retire from their current job, according to an AARP survey of 5,000 workers ages 50 to 64.

Of that group that intends to continue working for pay, 44 percent want a job that’s different from their current one. The survey, released in September, indicates that 6 percent have no plans to retire, about one-fourth plan to retire before they turn 65 and another 25 percent intend to wait until they are 70 or older.

The first thing everyone should  do – whether married or not – is to decide how much money they think they will need, where they want to live and expectations for post-retirement life.

“They (need) to be sure they have in their head what it is they want for their future,” says Dee Siegferth, The Milestone Center for Retirement and Estate Planning in Akron.

People in their 50s should talk about how they want to live 15 years from now. In your 60s, think about life in 10 years and those individuals in their 70s, consider what lifestyle they desire in five years, she adds.

Among items to consider – and these can be made much easier with a financial or investment advisor – are how your current earnings can carry you far into retirement.

Siegferth believes that an equally important aspect of long-term financial planning is having both a durable power of health (to allow someone to make medical decisions for you) and a durable power of attorney for financial decisions.

In a world of financial instability and declining pension programs, more people are taking a closer look at 401(k) plans and the future income they can generate for retirement.

“The 401(k) plan, in many instances, is the primary method of saving for retirement during your working years. This type of employer-sponsored retirement plan has become the most popular way to save for the future, as the offering of pension plans are significantly less prevalent in the industry,” says John Grech, a Middleburg Heights financial advisor with Edward Jones.

A great feature of a 401(k) plan is the possibility of an employer 401(k) match where an individual’s company adds money on behalf of the employee, typically up to a maximum predetermined percentage, based on the amount that employee contributes, he adds.

An individual has the flexibility in the amount of money he or she decides to contribute toward retirement.

Currently, employees can put away up to $18,000 per year in retirement savings. These funds are able to grow tax deferred until they are withdrawn from the retirement plan. And, if you’re 50 or older, you can contribute an additional $6,000, Grech says.

UNDERSTAND YOUR INVESTMENTS

Independent Mentor financial planner Ernest Brass warns there are good and not-so-good 401(k) plans.

“There are things about 401(k)s a lot of people don’t understand, which is why a good plan should give you someone to talk to and ask questions, rather than let you try to figure things out yourself,” Brass says.

If possible, Brass and Grech say conferences should preferably be face-to-face rather than by phone.

“If you are not familiar with investing, having someone to talk to can add a lot of value,” Grech says.

“There are various factors involved with a 401(k) plan that you should be aware of as you are saving for retirement.”