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May 1, 2014

Planning? It’s a Retirement Home Run

Jack Sirard contributing writer
Doug Doolittle started planning for his retirement in his mid-40s, an age when many people are still trying to figure out their careers.

Despite getting the apparent jump-start on retirement planning, Doolittle says that he wished he had started even earlier.

“I’m always telling my children that you just can’t start planning too soon in life. The sooner you put a plan in place, the easier retirement will be for you,” says Dootlittle, who retired a few years ago as director of regional parks and open space for Washoe County and now is an active participant in senior softball.

Doolittle, who has been playing and managing softball for many years, currently plays for both the 60 AAA and 65 AAA Last Call teams in Reno, and is a SSUSA tournament director. He says he plays a couple of times a week and usually has a tournament once a month or so.

“I also enjoy fly fishing and volunteer activities with Keep Truckee Meadows Beautiful, a nonprofit that works to eliminate illegal dumping and helps clean up the area and I work with the Nevada Land Conservancy,” he notes.

Doolittle, age 70, says none of this would have been possible without planning. He says that in addition to Social Security, he has his own deferred compensation program and saved private money to fund his retirement.

“You certainly can’t depend fully on Social Security for your retirement funds, but it’s a great fall-back if other things don’t work out. You really need other sources of income so that’s why I tell my kids to get fully involved in their company’s 401(k) plans and to take full advantage of the company’s matching funds. There’s nothing better than free money,” he says.

But even if you haven’t started planning for retirement and you’re in your 50s or 60s, it’s never too late, Doolittle says. “Even late planning can pay off if you really stick to it,” he says.

He has one non-financial warning for would-be retirees: “When you see your retirement date looming in the near future, you better have a plan of what the heck you’re going to do when you do retire. You’ll have a lot of free time on your hands and if you’re a social person like me, you’re going to want to do something…or many things,” he adds.

“That’s why softball and team sports work out so well for filling your social needs in retirement.”

Doolittle says he has used professional money managers, but he still likes to have a hands-on approach for his retirement money. “I like the challenge of it, but I also like to get professional advice when needed,” he says.

Sacramento certified financial planner Elfrena Foord echoes Doolittle’s concerns about the lack of financial planning on the part of many who are on the cusp of retirement.

“Too many people turn age 62 or 65 and immediately retire without having any financial plan in place,” says Foord. “They just don’t connect the dots and end up with money problems just a few short years into retirement.”

She also says that while retirement runs smoothly if you develop a long-term financial plan early in life, it’s never too late to get started. “We’ve had clients come in our office at age 60 without any plan at all and if they have to work until they’re 70, they do have 10 years to build their investment portfolio,” she adds.

Financial adviser Bob Dreizler notes that when he meets with a new client, the first question is when can they retire.

“I think the word ‘comfortably’ is implied in this question and for some people, I tell them that they will need to keep working as long as they humanly can.

“For others who have a big public pension or two coming in, plus Social Security and money in retirement account, I tell them not to get frivolous and not to worry too much,” Dreizler says.

But most people fall somewhere in between and their best strategy is to spend and invest intelligently, he adds.

“There are so many factors that impact how long your money lasts during your retirement years: longevity, large medical or long-term care expenses, investment performance and inflation,” he says.

“In our perpetual microscopic interest-rate environment, it’s hard to find safe investments that keep up with inflation. I think that you have to have a higher portion of your investments in stocks and diversified income-producing mutual funds than in bonds and CDs, but this scares most people.”

Dreizler notes that those working longer have the opportunity to build up their retirement savings and can delay taking Social Security thereby giving them a larger payout down the road.

“I think the general rule is that you should wait as long as possible to start taking Social Security, particularly if you are in good health and don›t really need the extra money yet. If you have serious health problems or are a whiz at managing money, you might want to start earlier.”

Boston money manager Dan Seidman says that those building up their assets for retirement need to look at their complete financial picture.

He says the first step toward a safe financial retirement is to pay down your debts. “You certainly don’t want to have any credit card debt on the books and your car should be free and clear as well,” Seidman says. “In addition, in a perfect world, you’d own your home outright or only have a few years left paying off the mortgage.”

Financial planner Foord agrees and points out that while you may meet the goal of paying off your house, you’ll need to have money set aside for repairs and updates. “If you’ve lived in that same house for 10 to 20 years, chances are you’ll want to update the kitchen or put on a new roof and that can be costly so you’ll need to have a cash account set up to handle such major expenses in retirement,’ she says.

Seidman says that in retirement, “you are going to need personal savings, pension and Social Security. Some people won’t get a pension so they’ll either have to work longer giving them more Social Security income or invest better to achieve higher returns.”

Or, he notes, they might have to use their home as part of their financial picture. “By this I mean that they can downsize their home after the kids leave and/or move to a lower-cost area. If they do so, they’ll likely have extra cash that they can either invest or use to pay their bills going forward.”

“An investor doesn’t have to be aggressive if they have a long-term horizon. If you get a reasonable return, 6 to 8 percent over 30 years, and save regularly via a 401 (k), IRA or ROTH IRA, a person should be in reasonable financial condition to retire.”

On the flip side, he says “you really cannot bulk up in five years if you have neglected the prior 20 to 25.”

His advice for those five years from retirement?

Step one would be to focus on eliminating debt. Then you should maximize all retirement payments into your 401(k). “Once that’s done, start an IRA or Roth IRA. You are allowed to make extra payments after age 50, you can contribute $6,500 per year as opposed to $5,500 for those not yet 50.”

Contrary to what many might think, “your house would be the most likely place to look for extra cash in those last years,” Seidman says. “Can you go to a smaller place? Pay cash for that place, and then use the residual as personal savings. You get $250,000 as an individual or $500,000 as a couple in ‘free appreciation’ before capital gains taxes are due,” he explains.

The new retirement for many likely involves part-time work and not a life of playing golf day after day. Or it also might mean serving on boards or volunteering, he adds.

While there is not one set path that leads to a comfortable and secure retirement, what the financial experts and those enjoying retirement today do agree on is to have both a financial and lifestyle plan in place long before you exit the workplace.

Jack Sirard is a nationally syndicated business writer, a senior writer for Senior Softball News and Managing Editor of Softball West Magazine.
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