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Reshuffling the retirement cards

If you’ve found yourself rethinking your projected retirement timetable in light of investment losses over the past 18 months, you have a lot of company.

A 2008 AARP study found that 27 percent of older workers were refiguring—and postponing—their retirement plans because of the economic slowdown.

Specific reasons are as varied as the population, but, generally, it is simply because either people haven’t saved or are not saving enough for retirement, or because those who as of October 2007 (when the markets peaked) believed they were close are now counting hefty losses and don’t feel comfortable proceeding with earlier plans.

The fact is, many seem ill-prepared.

A study by the Congressional Research Service found that the median amount saved in their 401(k) plans by those aged 55 to 64 is just $61,000. Another, by the Employee Benefit Research Institute, found 43 percent of those age 55 or older have less than $50,000 in savings, including 401(k)s, savings accounts and investments.

Clearly, these numbers aren’t just about retirees having to dial back extravagant lifestyle expectations or grand vacations. Fifty-nine percent of respondents in the AARP survey said they were living on fixed incomes and having a difficult time paying for such essentials as rent or mortgages, food, gasoline and medicine.

Lesser expectations

While adjusting your vision of retirement is one way to attempt to cope with these tough times, investors who can do so should certainly continue to contribute to 401(k) and other tax-advantaged plans and not join the 20 percent of baby boomers who told the AARP they had stopped contributing.

Wall Street’s meltdown shouldn’t stop your own drive to a fine retirement. If you don’t feel confident in the stock market, you might consider bonds or other fixed income assets.

Working several years beyond the date you had originally envisaged—the average current retirement age is 63, and 34 percent of baby boomers are said to be considering delaying retirement—can be a partial solution for many. That way, you’ll have more years to save, and may avoid taking Social Security early.

That will boost your monthly checks when you finally do retire—but keep in mind that Social Security benefit increases (except for cost-of-living adjustments) stop after age 70.

Working longer as you approach 70 is definitely a key to a more secure retirement for many. Experts who deal with older workers advise staying in the labor force rather than quitting, risking losing some skills and then trying to get back in.

You may have to accept a smaller wage, or find yourself working for someone much younger.

Nevertheless, working longer is definitely a trend.

The Employee Benefit Research Institute says in 1999 the percentage of workers 65 and over was 12 percent. In 2008, it had risen to 17.3 percent.

If you would like to discuss any adjustments to your retirement portfolio, please give me a call.