Near retirement? Plan with a few tips in mind

And, the possibility of recession has forced some unprepared baby boomers to begin taking stock of retirement possibilities, according to Kyle Da­na of AG Financial Solutions.

Dana, senior vice president of retirement solutions for the Springfield firm, offers practical tips for individuals hoping to retire within the next few years.

• Don’t cut giving your tithe and offerings. The company is affiliated with the Assemblies of God and operates according to the faith, Dana said. Man­­­­­­­­­agers ad­vise clients to stick to faith values, regardless of ec­o­nomic conditions. “Every­thing we own belongs to God,” he said. 

• Shut off the television. “The media is doing a wonderful job of inciting mass panic,” Dana said. The media continue to refer to the Great De­press­ion, and people react to the news. 

“They are two completely different scenarios…. Money is a very emotional thing. But surrounding yourself with media [reports] heightens your emotional distress,” he added.

• Have a retirement income plan. An advisor can help develop a plan Dana characterized as “like an extended budget.” 

Determine potential in­come sources, such as Social Se­curity, pensions, appreciated stock and retirement savings. Match your income sources with anticipated costs. “Then you can determine how much you will need to draw and how long the money will last,” Dana said.

Review your budget annually after retirement because some ex­penses, particularly health­care, are more difficult to predict. “How you take your money out is just as important as how you put your money in,” he said.

• Save some cash re­serves. The rule of thumb is to have enough emergency savings to cover living expenses for three to six months. But individuals nearing retirement should have one to two years worth saved in cash or other liquid assets. 

“Like today, [during] an economic hit, you could go to your emergency cash reserve and not touch your stocks to allow them to rebound,” Dana added.

Develop a proper allocation and rebalancing strategy. When the market is strong, people tend to act more aggressively than they normally would. In­stead, you should consider your age and time horizon and make certain you respond to the market in ways appropriate to their circumstances.

“If you have a 60-40 strategy [60 percent in stocks, 40 per­cent in other investments] in a growing market, you may end up with a 70-30 portfolio, so you are at higher risk,” Dana ex­plained.

You should examine your portfolio at least twice each year and rebalance as needed. “A lot of people are losing more than they should because they did not have a rebalancing plan in place,” he said.

• Pay down high-interest debts. Pay high interest debts first, and then concentrate on others. Even paying just a little extra each month can help save interest costs.

• Consider mortgage issues. The issue, Dana contends, is not whether you should pay off your mortgage but when. “Many boo­mers are rushing to pay off their home instead of building re­tirement,” he said.

Many individuals who have paid off their mortgages are now having to take home equity lines of credit to cover living costs in retirement. Determine your retirement savings needs first. “Your time horizon is the end of life,” he said. “Your accumulation time usually is 65 to 70.”

• Postpone retirement. Un­der some circumstances, you may need to postpone retirement. Even a few years can make a significant difference in your plan’s growth. Or, consider finding sources of additional income to supplement your re­tirement savings.

• Be wary of promised guarantees. While not all offers are bad, consumers need to scrutinize opportunities, such as in­dex bonus annuities, which off­er an extra 10 percent plus a guar­antee for a specific additional percentage, and reverse mortgages.

“You need to examine the fine print. And remember the old adage that if it sounds to good to be true, it probably is,” he said.