Retirement Planning Essentials For Late Starters

BERLIN – For those quickly approaching retirement, proper planning may have been put on hold for a variety of reasons. It could have been due to a lack of savings as people find themselves dealing with such financial strains as higher education costs for their children or caring for elderly parents. Others may have set up 401(k) plans through their employers but have lost track of the assets held there. Regardless of the reason, it’s never too late to construct an appropriate retirement plan.

"Whether you’re behind in your savings or just don’t know how much you may need, Merrill Lynch’s Retirement Income Service can help you develop a plan," said Stephen Mitchell, Director of Education and Planning in Merrill Lynch’s Retirement Group. "Our clients are often pleasantly surprised at what’s possible, even at a late date."

According to Mitchell, one solution to a savings shortfall would be to work a few extra years. While this may not fit your original view of retirement, Mitchell points out that this is a great time to do something you love, perhaps part time or even on a consultative basis. The extra income can postpone the need to tap retirement savings or start Social Security payments, and can provide health care benefits as well. "The concept of a phased-in retirement is already here," says Mitchell, referring to the 2006 Merrill Lynch New Retirement Survey findings that 71 percent of Americans plan to keep working in some capacity after leaving their full-time careers.

Some people may have been saving for retirement for many years but have not integrated these savings into their overall financial strategy. "They have assets scattered among many investments and don’t know how they can best convert those assets to income," says Mitchell. "These are questions that can easily be answered by sitting down with your Financial Advisor and working out a strategic retirement income strategy."

Your Financial Advisor can explain the nuances of proper retirement planning. You can also set up a plan for taking distributions from your qualified retirement accounts.

"Depending on the type of account, there may be penalties for withdrawing too early or too late," says Mitchell. "Tapping into an IRA before you’re 591/2 can result in a 10 percent early withdrawal penalty. On the other hand, if you don’t take your required minimum distribution in time, you can get hit with a 50 percent penalty on what you should have taken out."

As part of your retirement strategy, take a close look at your portfolio.

"Prospective retirees need to review their asset allocation with their Financial Advisor to make sure it’s appropriate for their objectives, financial circumstances and comfort level with risk," Mitchell says. "For example, being too heavily weighted in equities runs the risk of a major setback in your retirement plans if there’s a severe market decline. On the other hand, if you are heavily concentrated in fixed income, it may be appropriate to consider adding some equities to help your retirement income keep pace with inflation and reduce the risk of outliving your income stream."

Above all, retirement planning should be about finding ways to fulfill lifelong dreams. Mitchell recommends "test-driving" your new lifestyle for a few years before actually retiring.

(The writer is a Merrill Lynch Senior Financial Advisor and can be reached at 410-213-9084.)