A new tool for planning retirement

If you're a baby boomer with an investment portfolio that shrank in the first years of the 21st century, you may have gone from dreaming about early retirement to worrying you'll never retire.
If so, you have lots of company, according to a recently released survey by AARP, the association of older Americans.
Four out of 10 workers over 50 believe that to pay the bills, they will have to continue working after reaching retirement age. An additional 26 percent said they expected to keep working by choice.
Working at 65 or 70 is a great idea if you love what you do. It's not so hot if you'd rather be doing something else.
What's a depressed pre-retiree to do?
Turn to your computer, or call on someone who has one.
With personal finance software such as Quicken 2004, you can quickly get a rough sense of how well your finances will hold up. It's amazing to see how little adjustments here and there affect the outcome.
Maybe your retirement prospects aren't as grim as you think.
Quick calculation
While it's worth spending a few hours with Quicken's sophisticated retirement planning tool, start with the simpler retirement calculator, found under the planning button. It will give you a good sense of how factors such as time, the level of savings each year and investment return affect the result.
Suppose you are 50, hope to retire at 65, live to 85, have $100,000 in investments and need $50,000 a year from your retirement portfolio. In that case, you'd have to invest an additional $29,000 a year for the next 15 years, assuming an investment return of 8 percent a year and annual inflation of 2 percent.
Seem like too much? Suppose you postpone retirement to 67 and find ways to trim expenses so you'll need only $40,000 a year after retiring. In that case, you need to save about $16,000 a year, about half as much.
You'd have to be a math whiz to figure this out on your own. This function alone makes the newly released version of Quicken worth the price, $49.95 for the Deluxe edition after a $10 rebate. The Premier edition, which has more functions for investors, is $69.95.
Of course, Quicken has lots of other functions. I've been using it for years to track my bank accounts, pay bills online and keep investment records. There are other financial programs, but Quicken dominates the market.
Order the software at http://www.quicken.com or find it at a computer store.
Saving for college
I recently answered a reader who wanted to start saving for a grandchild but had only $500 to start with. I suggested ways to find mutual funds with low initial-investment requirements.
Since readers had a big interest in this subject, here are a couple of other approaches.
One is to invest in a 529 plan. These are state-authorized investment programs restricted to college investments. Many have initial investment requirements as low as $25 or $100.
The big benefit to 529 plans is that investment gains used for college are free of federal tax. The drawback is that shopping for them is a headache.
Start with the book "The Best Way to Save for College" by Joseph Hurley. Order it at (800) 400-9113. Or go to Hurley's Web site, which has lots of information on these plans -- http://www.savingforcollege.com.
Another way to make a small investment for a college is to do an end run around a mutual fund's minimum investment requirement by using a broker.
A brokerage typically pools its investors' orders together and then puts just one large order in to the fund at the end of the day. By joining with other investors, you don't have to worry about the minimum.
Of course, you still must meet whatever account minimum your broker has, and it's important to consider any commissions or fees you'll be charged.
XJeff Brown is a business columnist for The Philadelphia Inquirer. E-mail him at brownj@phillynews.com.