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Shenandoah Valley Business Journal – October 2011

Experts:  Don’t Let Poor Economy Derail Your Retirement Savings

There’s No Substitute For Saving Early, Financial Advisers Say

You’ve been planning your retirement for years. You diligently set aside a percentage of each paycheck to fund your investments. After a few more years of saving at a higher rate, you’ll be ready for the comfortable retirement you always dreamed of.

Then you get a pink slip.

In today’s tough economy, many people have seen their retirement savings derailed due to layoffs or other circumstances beyond their control. Some may even face an early, unwanted retirement. The key, according to experts: Don’t panic. 

“A lot of people, when they lose their job, they take their 401(k) and drain it, and that’s one of the last things you should do,” said Ed Morrison, a Certified Financial Planner with MetLife in Harrisonburg.

If you’ve lost your job, but still aren’t ready for retirement, Morrison suggests making yourself more marketable and re-entering the workforce. Taking classes at an area college is an easy way to become a more attractive employee, he said. And don’t think that just because you’re older an employer won’t hire you, he says.

“Even if you’re 55 years old, people like to hire older people like me because we show up for work; older people are actually more reliable,” said Morrison.

But if returning to the workforce isn’t an option, you’ll have to take a hard look at your portfolio, said David Larson, a Certified Financial Planner at Bluestone Financial Solutions.

“You really need to sit down and [evaluate] your budget and your priorities so that you can decide what changes need to be made financially,” said Larson.

This may mean downsizing by purchasing a more modest home, changing your travel plans, or eating out less, said Larson.“The right answer will be different from on person to the next,” said Larson. “What is important is that you track your expenses carefully on paper so that you can be more intentional about your purchases and so that you know exactly where your money is going.”

If you haven’t saved as much as you wanted, Morrison said that there may be other money you’re entitled to. For example, if you can’t return to work because of injury, you may be able tap into your Social Security disability. If you’re a veteran, there may be money or other types of aid available.

But both men said the surest way to have a comfortable retirement is to start saving early.

“If you’re in your 20s and you start thinking about it now, then fantastic,” said Morrison. “The latest is early 50s.”

Larson said that there is no “cookie cutter” answer as to how much money you should have saved before retirement, and it all depends on what you have planned for your future.

“For a married couple who is 65 years old, there is a 50 percent chance that one of them will live to be age 95, so you must plan for a long retirement,” said Larson. “Inflation can also eat into your retirement income, so you must also plan for increasing income in retirement.”

Looking to the future, Larson said that the extent of early, unwanted retirement is dependent on the global economy.

“The number of baby boomers nearing retirement is astounding, with more than 10,000 of them retiring per day in the U.S.,” said Larson. “If the economy does continue to sputter along, we may see more individuals retiring on their employer’s terms, rather than their own.”

But even with an unwanted retirement, there may still be a positive outcome, Larson said.

“Often times people begin second careers that may earn them less money but will be more fulfilling — others may happily trade the higher income for more time with their grandchildren.”