PLANNING Retirees struggle with finances

An expert advises planning your retirement spending at least one year before you leave work.
KNIGHT RIDDER NEWSPAPERS
You go to your mailbox on the day your pay stub normally arrives. The envelope isn't there. You know it won't come ever again.
"That may be one of the most traumatic moments of early retirement," said Shaun Mathews, an Atlanta financial services executive recalling when his father left the work force a few years ago.
Even retirees who have piled up solid pension benefits in jobs they've held for decades and faithfully socked away money into 401(k) plans or individual retirement accounts find it daunting to realize that what they have now must last all of the years they have left.
The good news is that it's possible to plan ways to stretch resources, for decades if necessary.
The bad news, according to research commissioned on behalf of ING Financial Horizons, a planning service that Mathews heads, is that barely one-fourth of us have even a clue about how to avoid painful mistakes along the way.
Planning your retirement paycheck successfully might require making a mental U-turn, said Dean Barber, president of Comprehensive Financial Planning Services Inc., an independent financial services company in Lenexa, Kan.
"While you're working, you focus on accumulation of assets," Barber said. "When you retire, you focus on preservation. It's a completely different mind-set. Making the change isn't always easy."
Planning
Making the change is easier if you start planning for the transition early. Count on at least one year of planning and tweaking to map out a retirement budget and run some reality checks, suggested Ken Logan, president of Logan & amp; Kilp Inc., a financial planning company in Overland Park, Kan.
"Realistically, you probably won't know what you are going to be spending the first year, so keep it flexible," Logan said.
The sooner you begin making these calculations, the more tightly you can control them after you retire, advisers say.
It's easier with five years of lead time, for example, to pay down credit cards, car loans and other debts that could otherwise eat deeply into retirement savings.
If you haven't already done so, it's time to begin sorting out your health and long-term-care insurance choices for protection against the two biggest potential drains on your savings.
Expected income
Once you've calculated your needs, add up the amount of money you can be sure of receiving, Logan said.
To begin with, those include the Social Security benefits you'll receive, pension checks (if you are covered by any of the estimated 56,000 pension funds in the United States that still pay guaranteed monthly benefits) and any monthly payments you will receive from annuities you own.
You can get a current estimate of your projected Social Security benefits by calling (800) 772-1213. Your human resources department at work can help you estimate your pension benefits. Your annuity contract, or the company from which you bought it, can help calculate what those payments might be.
Many people find that the amount they plan to spend exceeds the assured income. That gap expands with monthly withdrawals from savings.
Theoretically, you can withdraw about 6 percent of these savings each year without seriously eroding your assets, but advisers invariably recommend that you run reality checks first.
First, consider how quickly those savings would be used up if you spend according to the plan you first mapped out, Logan said.
If the money goes quickly, "you may want to think about adjusting your lifestyle or working part time after you retire," he said.
Second, be conservative in your calculations by presuming that you will live longer than you think likely and that prices will rise more than you realize.
"Think about it," Barber said. "Could you live now on the income you had 25 years ago? How would you live on your current income 25 years from now?"