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Financial Security for You and Your Family

Transcript of Chat With Carrie Schwab-Pomerantz and Jane Bryant Quinn

Question from Maria: I am 52 years old. I have a 401(k), some government bonds that pay out dividends twice a year and real estate investment (not a property purchase). What else do I need to have in place before I retire?

CSP: I just turned 50 last year and I think our age is a perfect time to sit with a financial consultant, someone who will look at the assets we have and the kind of income we can expect to generate from them, and compare it to what we think our financial needs will be in retirement.

A lot of people don't know how expensive retirement is. You not only need to save in a 401(k), but also in an IRA and a taxable account to achieve the lifestyle you've become accustomed to.

A financial consultant will give you a savings plan and will [make sure] that your current investments are properly diversified (hopefully in mutual funds) that reflects your time frame for retirement and your risk tolerance.

Without seeing your portfolio — what's in your 401(k) — it's hard to comment on any specifics for your portfolio, but you're on the right track for inquiring and hopefully building a plan.

JBQ: Great advice and just a couple of things to underline. So many people keep asking how to diversify between stocks and bonds and what they should own and buy. None of that matters if you are not saving enough money.

Saving more money is worth more than almost any asset allocation plan I can think of. While you are at it, get rid of your debt and pare down your spending.

You will succeed if you enter retirement with no debt, reasonable living expenses and more savings — no matter where you invest.       

Question from Craig in Denver: I'm 52 years old. I have no pension but have a small retirement nest egg worth $100,000. How do I start planning for retirement?     

CSP: Do some basic calculations. How much do you need each year to live on? Then figure out exactly how much your savings will grow, how much you will receive in Social Security or from other sources, and determine how much more you have to save each year to make up the difference. You may want to consult with a financial adviser.

You will get the maximum Social Security benefit if you are able to defer benefits at least until your "full retirement age" (66-plus) or even more until age 70. So, realistically, you should think about working (even if it is part time) well into your mid to late 60s.

Save, save, save! First, be sure you are capturing any employer match. And then try to contribute the max to your 401(k) or other retirement account.

In order to save, you will likely have to get creative about ways to save. Even small things like conserving on your phone bill or cable bill can add up over time. A smart budget can be your best friend.

Make your savings automatic — the best way to follow up on your plans to have your savings automatically directed to your retirement or savings account.

Be smart about how you invest your savings. You likely don't want to take on a huge amount of risk, but with more than 10 years to go until you retire, you will need some potential for growth in your portfolio. Again, it can be wise to consult with a financial planner so that you get yourself on the right track

Stay vigilant. A couple of times a year check your progress against your goals, and make adjustments as needed.

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