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Taking Responsibility for Retirement:

How Today's Scary Headlines Can Help Your Retirement Plan

First, it was the combined whammy of the tech wreck and the post-9/11 recession that battered our 401(k) accounts. Next was inflation in health care and education costs that further diverted indebted consumers from concentrating on retirement. Now come the headlines that any company facing tough times - or intense shareholder pressure - can pull the rug out from under its retirees hoping for the traditional three-legged stool of retirement - pension, Social Security and savings.

All three legs are in trouble - we aren't saving enough, Social Security is under attack and traditional pensions are disappearing - fast.

For retirees facing a sudden loss of pensions and benefits, there are really very few options save going back to work or turning home equity into a personal bank. So the time to start taking on the lion's share of your retirement responsibility is now, whether you're five, 10, or 20 years away from hanging it up, if that's your plan.

One general tip. If you're not really certain where you stand, get some help. If you've never sat down with a financial adviser it may be time to get a second opinion on your retirement readiness. The meeting may yield some ugly news, but it's better to know the options than cross your fingers.

Here are some things you may want to discuss:

What does 'retirement' mean to you? It's arguable that traditional retirement is going to be dead for many of us. So you may want to start thinking about a second part-time career or new ways to earn.

Do a retirement spending dress rehearsal: In the last few years before retirement, see how much you can live like you're already retired. Give up the lattes and the pricey clothes and dinners; see if you can live with a smaller car or a used one. Retirement is easier if you can downshift into it, both from a monetary and activity standpoint.

Get in shape -- physically: It may be strange to hear health advice tied to your financial wellbeing, but it should be one of the first things you consider. That's because the numbers on a bathroom scale, blood pressure monitor or cholesterol report can dramatically affect the cost of your healthcare and insurance premiums going into retirement. You'll find that pre-existing conditions can boost your premiums - or possibly deny you coverage. That's a very ugly surprise going into the years when you're going to need healthcare coverage the most.

Consider a career shift: It may be a bit extreme to switch careers just because a particular employer has better benefits and savings options. But if the job appeals to you and you can make a move without endangering what you've already accrued, why not consider it?

Use your catch-up options: Various IRA and 401(k) options allow you to make additional contributions over standard savings limits above the age of 50. Make sure you know what those additional amounts are and take full advantage of them.

Don an investment inventory: In a 30-to-40-year career, an individual may have gathered bits and pieces of pension benefits and personal savings and investments along the way. Likewise, there might be insurance policies, savings bonds and other small investments that may have slipped one's attention. A re-evaluation of retirement options should begin with a full accounting and reorganizing of all investment and savings assets, preferably in an organized outline that's easy for you and your adviser to access.

Think about health savings accounts: Today, there are strict limits and spending rules for health savings accounts, but if some lobbyists get their way, there might be a day when health savings accounts can become a long-term savings solution similar to a 401(k) plan. Getting into the pre-tax savings habit with health care dollars is a good habit to get into in case there's more flexibility awarded to these accounts in the future.

June 2006 – This column was authored in cooperation with Financial Planning Association.

This material is for informational purposes only and is not intended to provide specific advice or recommendations to any individual or group. Before making any financial decisions or commitments, please consult with your financial professional.

Securities offered through LPL Financial , Member FINRA / SIPC .