Planning for retirement

If you think you’re falling short on financial planning for retirement, you’re not alone.

In 2013, nearly half those ages 18 to 60 surveyed for a report by the Federal Reserve Board of Governors said they had given little to no thought to financial planning for retirement, and 19 percent of those ages 55 to 64 said they had no retirement savings or pension.

If you fall into the above categories, don’t panic.

The sooner you act, the better the odds of making a difference in those retirement accounts, local financial advisers said. Putting together a plan to gain ground on retirement finances means adhering to some basic tenets.

“Somebody who’s reaching 60, within four to five years of wanting to retire, I would absolutely say there is a sense of urgency, and there should be,” said Linda Zivney, registered principal at Zivney Financial Group, Bend. “Planning should not begin at the age of retirement. It should be years in advance.”

Retirement planning should involve some basic steps, including a review of your retirement accounts and setting realistic goals for how you expect to spend retirement. Setting goals can help answer the basic question: Will you outlive your money?

“A lot of people are wondering the same thing,” Zivney said. “Until they see it modeled out and written out, it’s an unknown.”

Retirement planning involves a number of factors, from knowing today’s expenses and savings to accommodating future unknowns such as medical expenses, changing tax brackets and inflation. The biggest questions, advisers said, center on what their clients expect out of retirement and do they have the resources to match those expectations.

“The people I see have a pretty good handle on whether or not it’s close, a good handle on whether or not it’s doable,” said J.C. Hallman, financial adviser at Mid Oregon Credit Union, Bend. “Their biggest question is, will they have enough for as long as they want to retire and not skimping for the next 20 years … .”

The Great Recession of 2007-09 set back many households financially, ground that’s been hard to regain, according to the Federal Reserve’s “Report on the Economic Well-Being of U.S. Households in 2013.”

Thirty-four percent of households surveyed reported being worse off financially than five years earlier; an equal number reported being in about the same financial shape; in other words, they gained no ground financially.

If they moved money out of retirement accounts as the value of those accounts shrank during the recession, they fell further behind, Hallman said. Riding out a recession by keeping hands off retirement accounts is preferable to taking cash out of those accounts, he said. Making up that or any loss may mean working past your expected retirement age to close the financial gap.

“Clients are working longer or …, if they want to replace their current position, are taking part-time (work) to offset any reduction in retirement, or reducing expenses,” Zivney said.

Working to funnel cash into retirement accounts is but one part of the battle. Reducing debt and cutting expenses are important steps on the way to achieving a retirement goal, Hallman and Zivney said.

“The big factor in retirement is expenses versus income,” Zivney said. “If somebody who is close to retirement has a lot of liabilities and a lot of debt and their expenses are high, it’s not going to be as attractive a retirement as those who have less debt, that’s for sure.”

Many people Zivney meets don’t have an inkling what they spend on a monthly basis, she said. Taking a hard look at expenses and budgeting their spending are difficult for many people to accomplish.

“But save as much as you can,” she said.

A qualified retirement account comes in the form of employer-provided plans such as a 401(k), an individual retirement account or a Roth IRA, for example.

Qualified accounts allow their holders to deposit savings on either a pretax basis, in the case of a 401(K), for example, or after-tax, as in a Roth IRA. The account holder may be in a lower tax bracket when the time comes to withdraw those savings, which may dictate the choice of retirement account today, advisers said.

The Internal Revenue Service limits the amount account holders may deposit into qualified retirement plans, but those limits go up for account holders age 50 and over, according to the IRS. For 2015, annual contributions to 401(k), 403(b) and other plans are limited to $18,000, the IRS announced Oct. 23. Employees over 50 may deposit another $6,000 annually into their plans as a “catch-up contribution,” according to IRS guidelines.

Roth IRA contributions are limited to $5,500 annually, or $6,500 annually for those age 50 and above, according to the IRS.

Employer-provided pension plans are pretty much a thing of the past, Zivney said. “It’s up to us to save and provide our own pension,” she said.

However, successful IRAs require the account holder not only to make steady contributions, but also to choose funds for which the investment strategies match the account holder’s retirement goals and timetable. For example, inflation may eventually reduce the purchasing power of money invested heavily in conservative funds, Hallman said. An investment strategy that embraces more risk may be appropriate.

On the other hand, entering retirement with too much exposure in funds that embrace risk may be inappropriate, too, Hallman said.

Retirement investors have to ask the right questions, he said: “Are my investments matching my risk tolerance? Do I have a time frame for when I’m going to use these funds that is reasonable? Are they allocated correctly?”

Both advisers suggested reviewing your retirement portfolio and investment choices regularly.

Misconceptions about financial planning for retirement include failure to account for medical and other expenses, such as travel, relying too deeply on Social Security benefits for income and failing to account for the next, inevitable economic downturn.

“I would say it’s always a good idea to see where you’re at,” Hallman said. “Are you allocated to weather a good or bad market? What happens when the market does crash, not if.”

In many cases, retirement planning skips the inheritance question, although many of Zivney’s clients are concerned that they don’t become a burden to their children. “Most folks aren’t concerned with a legacy,” she said. “They’re more concerned with enjoying their retirement while they’re healthy.”

— Reporter: 541-617-7815,

jditzler@bendbulletin.com