The big 'R' - are you really ready for retirement?

Are you really ready for retirement? Probably not. While many people are ready for retirement emotionally; few are prepared financially. Let's see if you're really ready. Have you saved enough on your own or contributed enough to a retirement plan to live out your "golden years" in the style you're accustomed to? Have you taken the time to write down your retirement goals and prepared a specific plan to help you achieve them?

If you answered no to either question, it's not surprising. Millions of Americans have not adequately prepared for retirement. They think Social Security is the only retirement plan they need. It may shock you to know that Social Security will provide, at best, only about 27% of the income you need to retire. And that's assuming you plan to live on 80% of your pre-retirement income. Where will the rest of your income come from? Social Security assumes your other sources of retirement income will make up the difference. They presume your retirement income will break down something like this:

27% Social Security benefits 26% company retirement income 20% other investments 15% personal savings 12% other retirement income

If your company retirement benefits won't bring in about 26% of your retirement income, you'll have to make up for it in personal savings or one of the other categories.

"IOU Investments" Did you know the government takes the Social Security taxes deducted from your paycheck and "invests" the money in U.S. Treasury securities? These "investments" are really just IOUs from the Treasury to the Social Security Trust Fund. The Treasury then uses the money to finance current government operations. The IOUs plus accrued interest are supposed to be paid back if and when the government ever has a surplus of funds. Not too likely in our lifetime!

The only other way the government can repay (redeem) those IOUs is to either cut Social Security benefits or raise taxes to increase revenues. A combination of the two is most likely. The government has already postponed the retirement age for millions of Americans. Beginning in the year 2003, the retirement age is raised to age 67.

Financial Solutions So you ask yourself, "What will I do?" The good news is it's never too late to start saving. If you are getting a late start, don't get discouraged. You can make up some lost time by saving more and/or pursuing more aggressive investments such as common stock mutual funds. Stocks involve greater risk but offer the potential for greater rewards. Using no-load mutual funds is the easy and affordable way to build your assets and reduce risk through diversification. With no-load mutual funds you don't pay commissions or sales charges on your investment. Mutual funds are a great place to invest your IRA accounts.

If your employer offers a retirement plan, sign up today! If you don't take advantage of a workplace plan such as a 401(k), you might as well be throwing money away. Your contributions are automatically taken out of your paycheck in pre-tax dollars, giving you savings discipline and a tax cut at the same time. According to Money magazine, 86% of companies offering 401(k) plans match at least part of your contribution, giving you an automatic gain. Other employer-sponsored programs such as the money purchase plan and profit sharing plan are also available. The investment earnings on these retirement accounts are tax-sheltered until withdrawn. If you're self employed, you need to initiate your own retirement savings plan. The easiest and cheapest plan is a SEP-IRA.

The bottom line: Don't rely on the government's "retirement plan." You need to build and shelter your own nest egg.

Harriet C. Marmon is president & chief executive officer of Security Trust & Financial Co., a wholly owned subsidiary of United Services Advisors, Inc., the investment advisor to United Services Funds. Security Trust specializes in retirement programs.