Smart retirement planning: solid planning and the right safety net will ensure that you enjoy your golden years.

AMERICANS HAVE TO CHANGE THEIR ATTITUDES ABOUT retirement planning. Many think they can take their time, but that kind of thinking will not leave much of a nest egg. In years past, Americans would hold one for 25 years then retire with a pension that could carry them through their golden years. That rarely happens these days. The rules of retirement planning have changed.

* RULE NO. 1: You Must Start Now. The earlier you begin planning for your retirement the better off you'll be. If you consistently save and invest, over the 40 years most of us can expect to work, the results can be tremendously favorable. The small sums you save in your early 20s will have the full 40 years to work for you in the stock market. Remember, if you invested $1,000 in Microsoft stock in January 1985, with stock splits and dividends, your money would have grown to more than $334,000 by August 2005. That is after the big 1987 crash and the tech wreck of 2000. The key is finding companies you can grow with over 20 years.

* RULE NO. 2: We're Living Longer, So You'll Need More Money When You Retire. People are living beyond 80 and 90, and chances are, you'll be one of them. Living longer means dealing with an increasing cost of living after you stop working. This means that your retirement planning must ensure that you don't run out of money in your golden years.

* RULE NO. 3: Don't Count On Social Security. With all the talk about privatizing Social Security, it's almost certain that there will be some changes to the system before you are ready to retire. Whatever you receive from Social Security will most likely not be enough to pay your expenses. Your retirement planning must ensure that you are not dependent on it for survival.

* RULE NO. 4: Manage Your Retirement Like You Manage Your Career. Without a career, where would you be? Without retirement savings, where will you be 20 or 30 years from now? Just as you must invest in your career and make the right moves daily to keep it on track, you must do the same with your retirement planning.

The following package is designed to help you start planning for your retirement, no matter what stage of life you are in. No one else will take on this responsibility for you. Turn the page and commit to taking action today. You owe it to yourself, your family, and your future.

20s

Budgeting Is Everything

SAVING FOR RETIREMENT STARTS WITH STRICT SPENDING IN YOUR YOUTH

KIYON SPENCER IS WIDE-EYED AND ready to take on life. The 22-year-old, who received his bachelor's in entertainment production through an individualized study program at New York University last year, has been working at Fox cable television network. As a sales assistant in the advertising sales department, Spencer earns a base salary of $30,000 and lives in New York City with two roommates. He contributes 8% of his base pay to his 401(k) and his employer matches 50 cents of each dollar up to 6%.

Spencer got a good start, but his college years came with a price. He owes about $19,000 in student loans and, after consolidating them, he's paying them back at the rate of about $108 a month. He didn't work while he was in NYU and relied on credit cards to cover some of his school expenses. Consequently, he has about $4,000 in credit card debt. Spencer also admits to having a "bad shopping habit." He's got a thing for clothes but says he's a smart shopper. "I know quality and I get good deals," says Spencer. His other fetish is movies--he has more than 200 DVDs and his collection is growing.

Spencer the Spender will have to turn into Spencer the Saver if he is to reach his goals. He would like to go to graduate school in a couple of years and, in the not-too-distant future, explore job opportunities in film or television. He will likely take a pay cut if he gets a more creative job, and he will need to be sure he can afford to do that and keep his debt under control.

He's already looking down the line to the day he can kiss the 9-to-5 goodbye. "I don't know that I would want to ever fully retire, but I would like to be financially secure by age 55," says Spencer, who defines financial security as having the ability to travel and not worry about how to pay the bills. "Right now, I wonder if the dollars I'm saving will go far enough in the future. My grandparents saved and made good decisions about money so they are alright in retirement. My room is approaching retirement age and, while she has some things in place on her own, she may be looking to me to help take care of her. It's tough because when you think you're somewhat prepared, there's always the unexpected." He adds, "I think retirement is harder than it appears. I want to be in good shape when I get there."

FINANCES IN YOUR 20s:

Like Spencer, many people in their 20s have a job they want to use as a stepping stone to further their career, are still in school, or are looking to go back to school for a more advanced degree. Job instability can make it hard to commit to a retirement strategy, but Jocelyn D. Wright, a financial adviser with Wealth Development Strategies L.P. in Houston, offers several ways to start saving for your retirement goals.

* Welcome to budget living 101. Priority No. 1 is creating a budget. "You need a budget to set parameters on spending," says Wright. It's likely you will be holding down your first full-time job, and a budget will help you adjust to having a regular income.

* Think "save," not "spend." A budget will also help you set aside some money to save and limit your credit card use. Build an emergency fund of at least three to six months worth of living expenses.

* Pay down debt. Accelerating debt reduction is a must. As interest rates continue to rise, consider consolidating student loans. There is also a congressional proposal to change the consolidation program from a fixed interest rate to a variable interest rate as of July 1, 2006.

* Join your employer's savings plan. A big part of getting ready for retirement is participating in your company's retirement plan. Join as soon as you are eligible. If your employer matches employee contributions up to a certain percent, take advantage of that by contributing at least that percentage of your own earnings. And if you're thinking about changing jobs, timing is critical. You might want to think twice about leaving your job before you are fully vested, or in other words, until you have been at your job long enough to take all of your retirement plan earnings with you when you go. A situation may arise where you have to leave a company before you're vested--having to relocate because of a spouse's promotion, for example--but otherwise, try not to leave money on the table.

* Be choosy with credit. Many people in their 20s are building credit for the first time, but many are also rebuilding or repairing it. If you are thinking about applying for a new credit card, choose one with a low, fixed annual percentage rate. If you already have one, contact the issuer to see if it is possible to get a lower APR, Wright says. (This may not be done so easily with store cards.) Another way to manage credit card debt is to pay as much above the minimum payment as possible, on time, each month. Optimize credit card payments by paying the card with the highest interest rate first.

* Fix your credit report. The credit report is the grown-up's report card. Review it for errors and any signs of identity theft. You can get a free one every year at www.AnnualCreditReport.com.

Companies now are looking at job applicants' credit reports, especially if you're in the financial services arena or will be handling money. Also, when you go to buy your first new car, or even when you fill out an application for an apartment, your credit report will likely come into play.

* Set realistic goals. Whether you wish to return to school, change your career goals, or buy a home in a few years, it is important to have realistic retirement goals because they will influence your saving and investing, says Wright. All of these life changes will affect your retirement. For example, if Spencer wants an income stream of $5,000 per month until age 80, and he retires at 55, he would have to save more than $11,000 a year, assuming an average annual rate of return of 10%. "That isn't realistic since it's over 30% of his base salary," explains Wright.

* Dump bad habits. Don't be tempted to spend beyond your means. Getting your first job often coincides with buying a new wardrobe and can be closely followed by moving into a new apartment. Even a disciplined person could be tempted to spend, spend, spend. Wright says consider purchasing prepaid spending cards, say $300 a month, for miscellaneous items. "Not only will you be forced to stay within that limit, you can get a printout of your purchases, which will help you track where your money is going."

The Advice For Your 20s

When you're in your 20s, you can take more risk because you have the luxury of time on your side. You can afford to ride out the market's bumps because you won't be touching that money in the near future. With this in mind, and Spencer as an example, Wright recommends an investment portfolio comprised completely of stocks: 30% large-growth, 30% large-value, 5% mid-growth, 10% mid-value, 10% small-value, and 15% international stocks.

"This is designed for the highest risk tolerance investor with a long time horizon. Investors with this kind of portfolio will look to achieve the highest return potential, but should understand that there will be the possibility for high fluctuations in market values," Wright says.

With that said, go for it. You have time to make up any losses, and you have many years of earning power ahead of you.

Asset Allocation 

stock % 100

fixed income % 0

30s

Unexpected Times Call For ...

TAKE LIFE CHANGES INTO CONSIDERATION IF YOU WANT TO RETIRE WELL

"MY RETIREMENT GOALS ARE PRETTY simple," Dermis White says, "By the time I reach 62 years of age, I would like to have at least $10 million in assets and to have real estate and other investments that provide a return of at least $250,000 annually." White, 39, and his wife, Tiffany, 31, have their work cut out for them if they plan to retire with $10 millions.

The Flossmoor, Illinois, couple has $92,000 in an IRA, which includes the $32,000 Dennis received from a defined benefit pension plan that was offered by his previous employer. Tiffany has $11,000 in a 401(k) and a separate IRA with more than $6,500 in it. And the Whites have a four-unit rental property that brings in $400 a month.

White, a real estate and franchise attorney, worked as an in-house lawyer at General Motors before joining the law firm of Holland & Knight. He left Holland & Knight last October to open a Century 21 franchise. He already had a real estate company on the side but figured that, given his legal background and experience in real estate, he could "kick butt" with a franchise.

But he's not doing so just yet. Getting the business off the ground has exhausted $40,000 of White's savings and led him to rack up $10,000 in credit card debt in less than six months. The franchise fee alone was $25,000. Then there were desks, computers, cabinets, and other equipment to buy.

Before White left Holland & Knight, the family's household income was about $200,000. He expects it to go down this year to about $150,000. He was mainly responsible for taking care of the household expenses, which total around $7,000 a month. Now, with his drop in income, meeting that obligation hasn't been easy.

White says the family has had several "false starts" trying to stick to a budget. A large portion of the money they lay out is spent on daughter Ashley, who is 2 years old. White suspects that they spend around $1,500 a month on each family member: "The baby has everything--a closet full of toys and clothes. And we eat out a lot."

The Whites want to have enough money to send Ashley to a top school. So far they've saved about $1,000 in savings bonds and a savings account. They plan to open a 529 plan for her soon. White believes the temporary pain of cutting back will be worth the future gain. He's estimating that the franchise will generate about $15,000 in positive cash flow a month, $5,000 of which can be socked away for future real estate transactions. "We want to get into real estate developing," says White. Between his wife's construction know-how and his real estate finesse, they plan to build an empire for their retirement by buying, building, rehabilitating, reselling, and keeping properties.

White is optimistic about the family's future: "We're going to be alright. I see myself semi-active in retirement, spending 20 to 30 hours a week handling my financial affairs and managing my companies. And as for the rest--relaxing, traveling, golfing, and exercising."

FINANCES IN YOUR 30s:

The Whites aren't alone in trying to get it together in their 30s. This is a time when people start to get serious about retirement. Their 20s have flown by and, after some time in the workplace, they are certain of one thing: They don't want to work the rest of their lives. "One of the first questions you should ask yourself at this point is what you need to do differently," says Jocelyn D. Wright, a financial adviser at Wealth Development Strategies L.P. in Houston. It could be that you need to stop spending haphazardly or go back to school to put yourself in a position to get a better job. There could be any number of things you need to do to change course.

* Do a reality check. Self-assessment is important. Once you enter your 30s, it's important to have greater clarity about your goals, taking into account your current income and asset base. You may be married at this point and it is equally important to make sure you and your spouse don't have competing goals, says Wright. "Talk openly, before marriage, about your goals, how much debt each of you have, and how you will manage the money--separately, a joint account, or a combination of the two?"

* Catch up on saving. When it comes to retirement, it's about catching up. A career change, marriage, the birth of a child, or other seen and unforeseen events may occur that may set you back financially. When this happens, set new spending controls, says Wright. For instance, if you've started your own business, establish a retirement plan in order to set aside tax-deductible, tax-deferred monies. Start with an IRA, which has an annual contribution limit of $4,000. As your business grows, consider other retirement planning options such as a SEP-IRA or Individual 401(k).

* Establish and maintain an emergency reserve/opportunity fund. While those who work for a company should strive to have three to six months of living expenses set aside, the self-employed should shoot for as much as a 12-month cushion.

* Protect your assets. Without proper protection, you can forget about achieving your retirement dreams. Life insurance is necessary for a growing family. Increase yours as needed to meet liquidity needs in the event of a premature death. The Whites may want to consider converting a portion of their term insurance to a permanent cash value policy for long-term estate planning purposes, says Wright. Maintaining adequate disability income insurance is important as well. Particular attention should be paid to the elimination period, benefit period, and the policy's definition of disability. You must also maintain the appropriate amount and type of liability insurance. This is especially important for business owners and individuals with rental property. "Consult with an attorney to make sure that any existing and future investment property is structured properly to minimize taxes and/or liability exposure. For example, if something were to happen to Dennis, would Century 21 buy back his franchise? And if so, how would the franchise be valued?" says Wright.

* Learn from your parents. Many in this age group have parents who are retiring. They are seeing how prepared or unprepared they are for it. It's a wake-up call. Many realize that their parents will need their financial support or that their parents may have to go back to work. The best case scenario is that your parents have prepared well for retirement. Unfortunately, that's not always true. Start preparing yourself now.

* Be savvy about your next moves. You may have already experienced a layoff or changed careers. When you're in transition, staying on track is key, says Wright. *'Roll over retirement funds and consolidate various accounts so you will have greater control over your money. You can't expect your old employer to look out for you, updating you on changes in the retirement plan," Wright points out. And don't dismiss vesting schedules. If waiting six months to leave a job will mean being 100% vested, consider staying and walk away with more money. Don't let entrepreneurial aspirations get in the way of common sense.

* Have a family spending plan. Be careful of overspending, especially on the children. And don't put saving for your child's college education before saving for your own retirement. "Just like when you're on an airplane and they tell you to put on your oxygen mask first and then help your child, it's the same with retirement," says Wright. "You want to provide for them, but not to the detriment of your own retirement. You can get a loan for a child's education, but you can't get a loan for your retirement." With private school education costs in the stratosphere, many parents will have tough choices to make. Do you fund expensive schooling now or put that money toward the college fund? "You may not be able to do everything. Figure out your priorities," advises Wright.

The Advice For Your 30s

A portfolio for investors in their 30s should be moderately aggressive, seeking above-average growth with a long investment time horizon. This portfolio will typically hold 80% equities and 20% fixed income securities. Depending on your situation, the portfolio for a family like the Whites might break down like this: 22% large-growth, 25% large-value, 6% mid-growth, 7% mid-value, 10% small-value, and 10% international stocks, plus 7.5% short-term government bonds, 7.5% intermediate government bonds, and 5% high-yield bonds. This portfolio can experience volatility and, "the investor should be patient, able to withstand unexpected changes in market value," says Wright.

In other words, you may need to put your seatbelt on for what could be a bumpy road. Hopefully though, in the long run, the ride will be well worth it, as you reap the rewards of growth.

Ideally, a 10% to 20% allocation in investment real estate would also be appropriate for someone at this age. "The goal is to have a properly diversified portfolio," says Wright.

Asset Allocation

stock % 80

fixed income % 20

40s

Finding Your Way at 40

MAKING FINANCIAL ADJUSTMENTS DURING THIS DECADE IS THE KEY TO JUGGLING PERSONAL GOALS AND LIFE CIRCUMSTANCES

AFTER TURNING 40, GAY AND DAVID High realized that they weren't prepared for retirement. Now both 41, the Norfolk, Virginia, couple is scrambling to recover from some unfortunate life circumstances and some poor financial decisions.

The Highs have two sons, David Jr., 12, and Derrick, 8. David Jr. was born nearly four months premature with his lungs not fully formed. Because of his condition, David Jr. spent his first four months in the hospital, his first three years on a heart monitor, and battled a host of medical ailments until age 10. He now suffers only from asthma, but the cost of several surgeries and the oxygen he needed to survive was not fully covered by medical insurance. David's care left the Highs with more than $15,000 in medical bills--a tall order for the couple, who were both in the Navy at the time. Their military salaries couldn't keep pace with the $1,400 rent, $400 utilities, and other monthly costs for a family of four living in expensive San Diego.

It wasn't long before they damaged their credit by running up their credit cards paying household bills. "It wasn't that we were using credit for leisure stuff," explains Gay. "We had to pay our bills."

As they struggled to meet their financial obligations, the Highs took small steps to improve their future. Gay retired from her job as a Navy general technician in 1997 to attend nursing school, working part time when she could. David, who worked as a ship's serviceman, transferred to Norfolk in 2001, which offered the family a more affordable standard of living. Two years after the transfer, they were able to purchase a small home and David retired from the Navy.

Using their combined military pensions of $36,000 a year, the Highs are determined to make up for all of the years they weren't able to save. David joined the Merchant Marines, earning $30,000 a year, and in January, Gay started earning $40,000 as a registered nurse. She also does part-time work at another hospital that should bring in an additional $14,000 a year. Gay is enthusiastically contributing 5% of her salary to the 403(b) on her job, and David contributes 5% of his salary to his retirement plan at work Eventually, the Highs hope to place all of their pension money into savings.

With the increase in income from their new jobs, the Highs are tackling their $10,000 in credit card and other debt. To speed up the process, they are considering refinancing their mortgage, which is at 8%, but their less-than-stellar credit has been a roadblock. They're even considering pulling their sons out of private school, which costs them $800 a month on top of the $120 to $170 they spend on childcare each week.

"We still have a lot of bills, but a big load has lifted, and we can see the light at the end of the tunnel," says Gay. "We don't want to grow old and have our children need to take care of us. We want to make sure our children go to college. David is one of 13 children, and they all went to college. We want the same for our children."

FINANCES IN YOUR 40s

The 40s can be a time of financial urgency for many. People may be dealing with lingering debt, taking care of aging parents, putting children through college, and worrying about meeting individual financial goals. To help the High family and others like them navigate through this critical time before retirement, Pierre Dunagan, president of The Dunagan Group in Chicago, offers these suggestions:

* Eliminate debt. "Keep an eye on debt in your 40s," cautions Dunagan, who advocates taking aggressive action. "Debt can be crippling at a time when you should be really focusing on your future." With the Highs' higher-paying jobs and Gay's income from her part-time job, Dunagan calculates that they have $2,500 in additional monthly income. He recommends they apply $2,000 a month to attack their $10,000 debt.

* Build an emergency fund. Typically, you'll need three to six months of salary to handle possible mishaps. The Highs can afford to save $500 per month toward emergency savings.

* Maximize employer savings plans. Employer-sponsored pre-tax savings vehicles offer great opportunities to save for retirement. Dunagan says the Highs should both increase their retirement plan contributions at work from 5% to 10%.

* Reassess priorities. Personal and family goals may need to be adjusted to make room for saving for retirement and other important concerns. The Highs may need to redirect the $800 per month they pay for their children's private school education and invest it toward their college education.

* Re-evaluate your retirement plan. You may have $100,000 to $200,000 or so saved for retirement by now, so it's important to track investments more closely. "See how your assets are allocated and whether it's time to make course corrections and adjustments," says Dunagan, "particularly if you haven't touched your portfolio in a while."

* Adjust life insurance coverage. Currently, David has $450,000 worth of coverage and Gay has $200,000. Dunagan says they each should have $800,000. A 20-year term policy will be cheap and meet their needs. Higher insurance levels may he needed to take care of the mortgage, the children's college education, and other living expenses.

* Open additional tax-sheltered investments. Saving outside your employer-sponsored retirement plan is always smart. Dunagan says the Highs should put $500 per month into a tax-sheltered retirement vehicle. He recommends an index fund inside a variable annuity because it would be tax deferred for the next 20 years and by then they would be in a lower tax bracket.

* Keep spending under control. As you become a higher wage earner, you become more vulnerable to layoffs. You also have to guard against illness more often as you get older. "You don't want to overextend yourself, assuming you will always be able to keep up your current lifestyle," says Dunagan. "You need to leave yourself breathing room, so if you or your spouse lose a job or get sick, you will better be able to handle the change."

* Don't refinance unless necessary. A lot of professionals run up $30,000 to $40,000 in credit card debt then refinance their mortgage to pay it off because the real estate market has been strong. However, they run the risk of running up their credit cards again. "They don't get that they are living above their means," says Dunagan. "You have to be careful of re-stripping the equity out of your house. At some point you stop refinancing and pay off the mortgage."

* Prepare for the possibility of divorce. "Divorce can be financially devastating," says Dunagan. "Design a plan to regroup, to get back on track, and be prepared to make adjustments, whether it's moving to a smaller place or whatever you need to do. Don't get depressed, take action."

The Highs want a larger home, and now they have the ability to save for one. Dunagan says they shouldn't pay more than $1,000 more a month for their new mortgage than they currently pay, to make sure they don't overextend themselves. "They should be able to get a better rate with an FHA loan," he says. "After 12 months of good credit behavior, [the Highs] should he able to get a good rate."

Overall, the best days are ahead for the Highs. "They have taken responsibility for what's happened and have bailed themselves out," says Dunagan. "They are making better decisions and wise choices. They are definitely on the right track."

The Advice For Your 40s

While typically you might expect an allocation of 65% stocks and 35% fixed income for the forty something crowd, if you are on track with your retirement goals and also have savings in cash, Dunagan likes to be a little more aggressive. "You want to take your foot off the accelerator a little bit, but you still need growth," he says.

Of course, since everyone will have different life situations by the time they reach their 40s, there are plenty of different configurations that a sample portfolio could take. One possibility might look like this: 25% large-cap. 20% mid-cap, 15% small-cap, and 5% international stocks; plus 20% government bonds, 10% corporate bonds, and 5% cash.

Asset Allocation

stock % 65

fixed income % 35

50s

The Fabulous 50s

SHORING UP THE FOUNDATION FOR YOUR RETIREMENT WILL PAY OFF LATER

EARLY RETIREMENT WASN'T ALL IT WAS cracked up to be for Monica Williams. Things had been tough since her husband died at age 36, leaving her to raise their two sons, now grown, on her own. A bus operator for nearly 29 years with the Chicago Transit Authority, Williams looked forward to calling it quits in February of 2004 at age 51.

Eager to relax, Williams spent time with her four grandchildren in Chicago, went to visit her sister in Daytona, Florida, and traveled to Arkansas. However, by the fall she was restless. "I got bored," says Williams, now 53.

Williams also discovered that she would need more than her $2,300 monthly pension to retire in the style she really wanted. So after all of eight months in "retirement," she went in search of another job.

"I figured I'd work for another 10 years, until I'm eligible for Social Security," says Williams, who lives in Blue Island, Illinois, just outside Chicago.

Looking for a less stressful job than driving the city bus, Williams opted for piloting the shuttle bus at Midway Airport. The job nets her about $1,200 a month, which supplements her pension. Although her monthly expenses, which include the mortgage on her condo, total approximately $1,900, unexpected car repairs and her desire to travel to places like Europe, Mexico, and Hawaii, often have her needing additional cash.

Williams says she'd like to retire for good at age 62. She'll have her existing pension and the accumulated amount of $300 a month she has been saving since starting her new job. Her current savings is only about $3,000. And over the last five years, she reduced her credit card debt from $23,000 to $2,000. "I doubled and tripled my minimum payments," says Williams. "It was hard, but I focused on what I needed to do."

Williams knows she needs to invest, but says she's a novice and needs a financial adviser to guide her through the process of creating a plan to maximize what she has to work with. "I want to know where I can put my money without too much risk," she says.

When she does retire, Williams wants to devote more time to her church. She also wants to spend time taking dance and exercise classes, visiting her sister in Florida, and taking other "affordable" excursions.

"I'll be a little older, so I might be able to settle down and relax more next time," says a hopeful Williams. "I love my grandchildren, but my sons shouldn't expect me to spend all my time babysitting," she says with a laugh.

FINANCES IN YOUR 50s

It's crunch time for just about everyone at this age. To help Williams and others like her get their retirement plans right, Pierre Dunagan, president of The Dunagan Group in Chicago, suggests the following plan:

* Firm up retirement options. This is the decade to think realistically about your retirement. "Decide what kind of lifestyle you want and plan accordingly," says Dunagan. For example, if you will be dividing your time between two homes, you need to earmark savings for travel expenses.

* Continue saving for retirement. With people living longer, everyone must continue to invest for their retirement. Dunagan says Williams should increase her current savings of $300 a month to at least $500 a month, with $200 going into a Roth IRA that invests in an S&P 500 Index fund.

* Calculate the right portfolio risk. Don't be too conservative, "because you could still have a lot of life to live and inflation would eat away at your principal," says Dunagan. But don't be overly aggressive because a lot of people had to go back to work because of their losses in the stock market. Staying on top of your portfolio at this time of your life is not a luxury but a necessity. "You must be diligent about visiting your financial planner once or twice a year. You really have to track your assets the closer you get to retirement," says Dunagan.

* Build an emergency fund. Dunagan recommends that Williams accumulate a minimum of $6,000 in emergency savings, or three months of living expenses.

* Consider investments outside of the market. This will give your portfolio diversity. Over the next three to five years Williams wants to buy a two-unit apartment building with her sister in Florida that can earn rental income.

* Take care of aging parents. Deal with end-of-life issues, like where your parents want to live and how. Do they have a will? Are they covered for long-term illnesses? Find out how you fit into their future and what may be required of you emotionally and financially. Advance knowledge will help you prepare on both fronts.

* Downsize housing costs. Consider selling your home for a smaller one or a condo. You can invest the proceeds toward retirement. A house can be a tremendous financial and physical responsibility. Williams still has more than 20 years to pay on the condo she purchased in the late 90s. Dunagan says she should add at least $100 a month more to the principal while she's working so she can cut her mortgage to essentially a 15-year mortgage. That way, by the time she retires, she'll have five years or less to worry about payments.

* Stop giving to relatives/children. "Find a way to wean them off you, because you may reach a point where you can no longer afford to lend a helping hand," says Dunagan.

* Explore long-term care insurance. If it makes sense, purchasing it in your 50s is a lot cheaper than at 70.

* Adjust life insurance. If husband and wife are both working, make sure each has adequate life insurance for what they would be responsible for during those earning years, says Dunagan.

Overall, Dunagan feels good about Williams' retirement. Between her job and pension she nets about $3,500 a month. With expenses typically just under $2,000, she has some $1,500 to build wealth with. Dunagan estimates that at age 62 she will collect more than $1,100 a month from Social Security, which is about what she makes now. If she is able to obtain the two-unit apartment building with her sister, the rental income will help to defray the costs of ownership. When she retires and is ready to travel back and forth more frequently to Florida, the unit can be vacated and used by her as a second home.

"When all the pieces come together, she should do extremely well," he says.

The Advice For Your 50s

"The closer you get to retirement, the more you need to dial back risk," says Dunagan. A 50-50 split of stocks and fixed income investments while you're in your 50s allows your retirement savings some room to grow while giving you a safety net of sorts. With the time approaching that you will need to draw on that money, having some measure of safety becomes an imperative for many people.

"However, if you are behind in your savings, you may need to continue to be more aggressive as an investor to make up for lost time," he adds.

When you're determining your asset allocation, consider all of your income--from Social Security, pensions, and elsewhere--to help determine how much risk is appropriate for you at this stage of your life. A possible portfolio mix might look like this: 20% large-cap, 20% mid-cap, and 10% small-cap stocks, plus 30% government bonds, 15% corporate bond funds, and 5% cash.

Asset Allocation

stock % 50

fixed income % 50

60s

Early Out

PLANNING FOR AN EARLY RETIREMENT TAKES FORESIGHT AND COMMITMENT, BUT IF DONE RIGHT THE REWARDS ARE SWEET

RONALD GIPSON IS LIVING THE GOOD life. He's been retired for six years and, at age 60, early retirement agrees with him.

He certainly deserves the fruits of his labor, having served Los Angeles County as a detective, deputy sheriff, and lieutenant in the sheriffs department. However, after 33 years of high-intensity work he was ready to chill.

Gipson didn't just leap without looking, though. "I read books and went to retirement seminars. I had to think about what life would be like with no overtime, no bonuses, and getting paid once a month," he says. Gipson lives in Chino Hills, California, with his wife, Lesley, 56, a retired entrepreneur.

"I refused to retire early if the numbers didn't work," he adds. So far they have, thanks to a generous Los Angeles County pension system. For each year he worked, he earned points for retirement and was able to collect 94% of his highest pay, providing a six-figure income, which he gets for life, along with annual cost-of-living raises. If he dies before Lesley, she will get 60% of his pension. Gipson also contributed for 16 years to the 403(b) plan, which was worth $40,000 when he retired. His employer matched up to 30% of his contribution, so every quarter the Gipsons get some of that money and use it for extras, like traveling. "It's not a whole lot, but it counts," says Gipson.

The couple has no significant debt other than a 30-year mortgage. They use American Express charge cards to avoid revolving debt and have no car payment.

Although Gipson has life and medical insurance, he doesn't receive Medicare or Social Security because under the Los Angeles County system in effect at the time, he paid no taxes toward either. "I have to remind myself to cut back on spending and to be careful," says Gipson. Even so, says Lesley, "We love to spend time with and money on our grandchildren."

And there have been other adjustments. "I was so used to my routine that the mere fact that I didn't have to get up was a shock," Gipson says. "It still is a bit. I don't miss the stress, the routine. It's a pleasant shock."

FINANCES IN YOUR 60s

Most people in their 60s are making the transition from planning for retirement to living in retirement. To make sure you're on track, here's some advice from Don Roman, a senior financial planner with MetLife Securities in Atlanta:

FIND BALANCE IN YOUR PORTFOLIO

Seek investments that will provide income, such as corporate bonds, guaranteed investment contracts (GICs), and annuities. To learn more about these investment vehicles, visit the National Association of Investors Corporation at www.betterinvest ing.org. Also, if you haven't already done so, get a financial planner who can tell you when you must take withdrawals and how to best manage your money.

And, make sure your retirement savings aren't sitting in one investment vehicle. The Gipsons' entire retirement plan is predicated upon Ronald's pension. "They should do their best to assess the long-term economic viability of the county's retirement system, which provides the Gipson's current and future income, as well as medical and life insurance benefits," says Roman.

PROTECT YOURSELF FOR THE LONG TERM

Statistics show people are living longer. African American women have a life span of 76.1 years, while their male counterparts are living until age 69.2, according to figures from the Centers for Disease Control in Atlanta. The closer you get to retirement, the more likely you will need additional insurance coverage. With that in mind, remember to:

* Review your medical coverage. Consider purchasing supplemental medical coverage to protect against gaps such as increased deductibles, higher out-of-pocket costs, and elimination of coverage.

* Purchase long-term care insurance policies. Compare the costs of long-term care insurance premiums versus the possibility of depleting assets to pay for such care. If you're retired, you can use the premiums previously reserved for disability insurance to cover long-term care insurance premiums. Ensure that policies cover the range of potential living arrangements, such as in-home healthcare, assisted living facilities, and nursing homes.

* Review your life insurance. Roman recommends two types of policies: universal life with secondary guarantees (ULSG) and guaranteed advantage universal life (GAUL). The coverage for the ULSG is guaranteed to last until the insured dies. Also, the premium is guaranteed to remain the same for the lifetime of the insured. The GAUL policy has a rider--the guaranteed survivor income benefit (GSIB)--that pays a fixed monthly income for the life of the beneficiary (versus the more traditional lump sum benefit). Visit www.unitedseniorsheaith.org and www.ahca.org to learn more.

ESTABLISH A CONTINGENCY PLAN 

Only one in five retirees or pre-retirees has a written plan for managing income, expenses, and assets during retirement, says Roman. The Gipsons, for example, don't have an emergency fund with three to six months of living expenses, which, regardless of age, everyone should have. Since many retirees live on a fixed income, it's also important to create a budget to help decrease discretionary spending. Any resulting savings should go into a diversified investment account, says Roman. Those dependent on one income should also think about what life would be like if a spouse were to die. If you or your spouse will receive it, factor in your annual Social Security benefit statement to determine the amount of any future retirement benefit. For budget and savings tips, go to the American Institute of Certified Public Accountants site, www.360financialliteracy.org.

DEVELOP AN ESTATE PLAN

As you reach your twilight years, meeting with a qualified attorney to develop an estate plan is a priority. First on the list is updating your wills to ensure they reflect your current wishes.

Second, durable powers of attorney and healthcare proxies should be prepared to provide instructions for how you want your affairs and healthcare treatment handled in the event of your physical or mental incapacity.

Third, determine your interest in legacy planning for your children and future generations. A site that may be useful in sorting out estate planning issues is www.nafep.com, sponsored by the National Association of Financial and Estate Planning.

The Advice For Your 60s

As you approach and perhaps enter retirement, you will need to change your asset allocation to reduce your portfolio's volatility and overall market exposure, says Roman.

Keep in mind that asset allocations will vary based on how much retirement savings you've accumulated and your specific life circumstances. There is no one model that is right for everyone. If you're in your early 60s, you might choose to stay somewhat aggressive with a 40% stocks, 60% fixed income mix. But, for many people, depending on their circumstances and risk tolerance, 20% stocks and 80% fixed income may be more suitable.

Typically at this age you'll want to have a more balanced portfolio overall. A possible mix might include: 20% investment-grade treasuries, 20% corporate high dividend bonds, and 10% corporate high-yield bonds, plus 10% large-cap growth, 12% large-cap value, 3% mid-cap growth, 5% mid-cap value, 3% small-cap growth, 5% small-cap value, 2% micro-cap, 3% international growth, 3% international value, and 4% real estate stocks.

Asset Allocation

stock % 40

fixed income % 60

70s

70 And Secure

AS YOU SHIFT INTO RETIREMENT, CHARTING A COURSE TO PROTECT YOUR ASSETS IS THE WAY TO GO

VERNETTIA PREE WAS 63 WITH NO intention of retiring anytime soon. As fate would have it, the decision would be made for her. Pree was forced to leave her nursing position at Kaiser Permanente Medical Center after she nearly died from a workplace injury in 1995. She is healthy now and, at 73, the divorced mother of five continues to learn how to deal with the unexpected.

Pree was unprepared to retire--financially and emotionally. "I had to learn to do with less abruptly," says Pree, who lives in Antioch, California. Before retiring she was taking home about $3,000 a month in addition to her share of her ex-husband's pension. She hadn't thought she would fully retire for some time, and she planned on working part time in retirement.

The impact of early retirement was rough. Pree had to file bankruptcy in the mid-1990s. "I had to walk away from some things because I had limited income. I wiped out that debt. It was a plus for me," says Pree, who previously had good credit.

Pree was also forced to sell her condo. "I owed more than it was worth, so I walked away from it," she says. She moved into an affordable senior citizen community, which helped her emotionally transition into retirement. For the last year, however, she's been living with one of her children.

Retirement has been somewhat difficult, but Pree's not complaining. "I didn't plan it like this, but all things considered, I came out better than some," she says. With Social Security, her ex-husband's pension, and speaking engagements about health, she earns about $20,000. She also received a lump sum of about $40,000 for retirement from Kaiser, which she invested in an IRA. She taps those funds about once a year for expenses that come up, like the dental work she will need soon. Pree will also get her ex-husband's full retirement benefit if she survives him.

FINANCES IN YOUR 70s

The 70s are often about slowing down and smelling the roses. But just as you're catching your breath, you may begin to worry about outliving your assets. As you shift course into retirement, Don Roman, a senior financial planner with MetLife Securities in Atlanta, offers some direction:

CURB YOUR HEALTHCARE COSTS

The biggest threat to many retirement portfolios is medical costs. If you don't have private medical insurance, you'll need to seek out Medicare. Log on to www.medicare.gov to find out about plan costs and long-term care options. To cut costs, consider alternatives like buying prescription drugs through mail order. You should also have a stash of money just to pay for medical extras and prescriptions, as those costs are likely to increase, says Roman.

According to the National Academy of Eider Law Attorneys, the average annual cost of nursing home care in the U.S. is more than $56,000, with 36% of that paid out of pocket by individuals and their families. If somehow you hadn't gotten around to getting long-term care insurance until your 70s, prepare yourself for sticker shock. When reviewing policies, pay particular attention to inflation protection, the waiting period, coverage, and the period of coverage to ensure that you have proper insurance for your needs. Then look for added bonuses. Some policies even allow supportive services to be provided by a spouse or other relatives. "You want to be clear on what your policy offers and doesn't," says Roman. For more information, check out www.life-line.org, sponsored by the Life and Health Insurance Foundation for Education.

TAP INVESTMENTS WISELY

At age 70, Uncle Sam requires you to start withdrawing from qualified plans. Minimum distribution requirements can be complicated. Go to the Older Americans' Tax Guide at www.irs.gov for help sorting it out.

You may need to look for ways to shelter that taxable income. "This is where legacy planning comes in," Roman says. "If you haven't already thought about your mortality, it should become a focal point for you to talk about what you would like to do for your dependents, your loved ones, your grandchildren, as well as your church or charity." Funds not needed for living expenses could be redirected to a life insurance policy, he says.

MANAGE YOUR MONEY

While one's needs are highly individual, the assumption is that as you age, you will need more income, says Roman. So you will need a portfolio heavily weighted in bonds and income-generating vehicles. However, keep your options open.

Consider dividend-paying stocks that will also give you some potential for growth, says Roman. There are a whole slew of bonds, such as tax free municipal bonds, corporate bonds, and treasuries to consider as well. Fixed income options would include guaranteed investments contracts and annuities. As you decide, Roman cautions: "Be conservative, you don't want to deplete your assets before your death. Even at 70 you could have a lot of living to do. You could exceed your life expectancy."

ORGANIZE YOUR DOCUMENTS

At this point in your life, there's no time to procrastinate. You need to take care of your business now. It's time to meet with an attorney to prepare an updated will, durable powers of attorney, healthcare proxy, and living will. All of those documents will serve you well when you need them.

A good place to study up on these issues is the wills and estate planning section of www.nolo.com. Also, make sure to tell someone you trust, such as your lawyer and a family friend, where the documents are to avoid confusion.

Take this time to review your financial situation so you can set sail on your new life with ease. Look at Pree. She loves that her time is her own and enjoys simple things such as friends and fishing. Her faith has strengthened. She says, "I've been able to survive sickness and having no job. Somehow it's all working out."

The Advice For Your 70s

The assumption is that you will need more income as you age, so you will need a portfolio heavily weighted in bonds and income-generating vehicles. The person who might want 100% in fixed assets is likely someone who needs income to meet living expenses now.

Realize, however, that you have more options than just bonds, says Roman. Consider dividend paying stocks that will also give you some potential for growth. Or you could reallocate your portfolio entirely and invest in an annuity, says Roman. Guaranteed investment contracts (GICs) are fixed assets with no appreciation potential but which provide income.

While you want to get more conservative in your 7Os, remember, says Roman, "You could have another 10 to 20 years or more, so you might need some growth, too." If growth is your main goal, then you're going to be served well by a portfolio with up to 60% equities.

Asset Allocation

stock % 0

fixed assets % 100