Preretirement Planning

One of the most important contributions to a successful retirement is advance planning well ahead of the actual date of retirement. Where you will live, and what your continuing activities will be are questions that should be considered. A location convenient to your children can be a great asset both to them and to you. Many retirees seek a year-round warm climate, while others prefer to remain where their roots are established.In developing financial plans for retirement, it is helpful to outline personal needs and preferences. Although individual circumstances and goals may differ, the following are general guidelines:

1. An income payable each month of retirement during your lifetime sufficient to enable you to maintain the same standard of living you and your spouse enjoyed before you retired. Because of tax reductions and a different pattern of expenses in retirement, the gross income needed may be only 80 percent or less of your preretirement income. However, it will be necessary to build protection against the ravages of inflation that decrease the value of the dollar.
2. Continuing income payable to your spouse after your death sufficient to maintain your customary standard of living.
3. Hospital-Medical-Surgical coverage which, combined with Medicare, will enable you to meet the major share of medical expenses.
4. As large a nest egg as possible for special needs, such as travel or unforeseen expenses. The nest egg may include a savings account, investments in money-market type mutual funds, bonds, or stocks, the equity in your home, and the L cash values of your life insurance contracts.

Careful advance financial planning can also reduce later retirement expenses, for example, completing the mortgage payments on your home before you retire. Plan to enter retirement with a new car or one of recent vintage in good condition. Consider putting your life insurance on a paid-up basis at retirement to avoid further payment of premiums. Plan to purchase desired high-cost items before retirement.

Because it is not possible to predict how long you will live in retirement, you should prepare for a wide range of possibilities: a long life, a short one, or something in between.

The Teachers Insurance and Annuity Association (TIAA), which provides pensions to the' majority of college professors, reported in 1979 that 778 of its annuitants were over 90 years old and 17 were over 100. Its oldest pensioner was 107 years old.

Clearly, long life is possible and it is well to avoid outliving your income. Social Security, annuities, and your company pension will continue until your death, and, in some cases, will continue after that in whole or in part to your named beneficiaries. But if savings are drained too rapidly, you may outlive them.

The following table shows the number of additional years people live on the average after reaching a given age. However, these are only, averages not a basis for firm planning. Many will not live as long as indicated; others will live much longer. As medical knowledge advances, these average expectancies may increase.

Average Additional Years of Life

Age Male Female
55 23 28
60 19 23
65 15 19
70 12 16
75 9 12
80 7 10
85 5 7
90 4 6
95 3 4
100 2 3