Tuesday, May 20, 2008

Planning for Retirement (Part 2)

In Part 1 of our "Planning for Retirement" post series, we started with a brief overview of the Baby Boomber retirement schedule and the problems and changes that could arise out of this huge demographic shift.

We also looked to the retirement wisdom imparted by investment manager and Financial Sense Newshour host Jim Puplava, and his co-host John Loeffler, in their recent FSN radio broadcast, "Planning for Retirement - Part 1".

Today we'll continue with part two of the FSN radio broadcasts.

In this segment, Jim and John continue their discussion of mass Boomer retirement, while emphasizing the need for sound budgeting and planning. An important part of retirement planning would come under the heading of "expectations management."

According to Puplava, many retirees are already starting to see some shocks from the falling values of their homes and investment portfolios. As a result of this, some current and future retirees may feel the urge to take on greater speculative risk in their savings and investments.

Program transcript excerpt:

"And last week, we talked about the budget. We talked about breaking the budget between fixed and variable expenses. And then we talked about expenses subject to inflation, expenses that weren’t subject to inflation and a lot of people are looking at changing their retirement dates.

In fact, it was amazing, there was an article in the Wall Street Journal this week, and it was on the front page and it said, “Americans are delaying retirement as housing and stocks swoon.” And they give the example, of about four or five couples, one guy was an executive for IBM and he was looking at his 401(k) program and also looking at selling his house, downsizing his house, taking the proceeds, getting a cheaper home to live in, taking some of the excess paying his house and then also where his retirement plan.

Well, guess what? At the end of the year it was a bad year for him last year, this year he was down 20% on his portfolio; the proceeds from the house – they had to drop the value of their house a lot more than they were anticipating. So you’ve got millions of retirement age Americans who are stung by this recent economic pall who are suddenly having to reassess their plans with many forced to quickly change course."

As you can see from Jim's example above, one of the main issues facing retirees will be a need for reappraisal of retirement expectations, in terms of both lifestyle and monetary comfort.

With sound planning, you may be able to secure a very enjoyable and fulfilling retirement, but it might not conform to the image of so many personal finance and lifestyle magazine covers.

For more on managing retirement expectations, and planning wisely in your investments and retirement expenses, see the Financial Sense Newshour's program, "Planning for Retirement - Part 2".

Be sure to catch part three of our retirement post series, when we'll look ahead to the concluding segments in the FSN "Planning for Retirement" programs.

We'll also outline some of the main points discussed in the program series, and top it off with a little bit of enlightened thinking on the issue of retirement. Hope to see you then!