When Your Paycheck Stops

By Author: Jane Bryant Quinn
Total Articles: 1
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Summary: One day, you'll look at your money and say, "That's all there is." No
paycheck, no raises--only the income you generate from the work and savings you
achieved in the past. Oof. What now? That's a scary question for boomers hitting the
milestones of 60 and 55. For years, you've focused on earning, spending and (more
recently) saving for the future. Now the future is heaving into view. You will retire--in
fact, some of your friends are free already. Many went cheerfully; others were pushed.
Some intend to work until 80, maybe including you. But you've entered the years when
plans can go awry. Ready or not, everyone has to figure out how to make his or her
savings last until 95. Wow. There's no way of nailing the future down.
But good preretirement planning can hold your anxiety down. Here's a start:
1. Figure Out What You Can Spend: Early retirement may turn into a pipe dream, once
you calculate how much income you'll need for the rest of your life. . "Some folks are
realistic about their spending," says planner Lauren Klein of Newport Beach, Calif.,
...
... but others--especially younger, executive-level retirees, have a harder time. "They
want to front-load their retirement and spend early," she says. "For them, loss of
status is a greater fear than outliving their money." (As if there's status in going
broke.) Smart preretirement planning begins with a budget--one that takes a first pass
at separating future wants from needs. Will you still keep two cars? Should you drop
your life insurance? Can you get out of debt before your paycheck stops? Living is
cheaper without work expenses. On the other hand, medical costs
will rise.
2. Redo Your Investment Plan: When you're getting close to retirement, reconsider
your investments. Bury any impulse to try to pick winning stocks--most of us aren't
any good at it. Switch to mutual funds instead. Are you willing to work longer, slash
expenses, work part time or move to a cheaper part of the country? The sooner you
decide, the better your chance of right-sizing your retirement.
3. To Roll or Not: At retirement, should you leave your 401(k) in your company plan or
roll it into an Individual Retirement Account? (OK, keep a "mad money" fund--but if you
lose it, take that as a sign.) If you've piled up company stock in your 401(k), divest it
now--not only the stock you bought yourself, but anything you received as a company
match. Diversify into mutual funds no matter how good you think your company is.

4. Tap Your House for Cash: You can't count the value of your house as a retirement
asset unless you're prepared to tap the cash. You might buy something smaller ormove to a cheaper part of the country. In big-company plans with low-cost choices
and good sources of advice, retirees could leave the money there, says Cindy McGhee
of A&F Financial Advisors in Charleston, W. Va. If you die, your spouse can treat the
plan as his or her own. But if your kids will inherit, it's smarter to take all the money
and switch to an IRA. IRAs let them stretch the payouts over their lifetimes, giving
them years of tax deferred growth.

5. Cover the Cost of Care: "Don't risk a lot for a little.” Most of all, you need to save--
and yes, "panic saving" works. Hurl money into a retirement account. It's never too late.

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