When You're 64

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When the Beatles recorded "When I'm 64," to them it seemed like a ripe old age. Now, the first of the Fab Four has hit 60 (Ringo, in case you're wondering) and is still working, though only because he wants to.

It's my fervent wish that you and I should find ourselves in the same happy situation. Retirement, as far as I'm concerned, isn't about crawling off to some Sun Belt senior suburb to while away the years with golf and a Winnebago. It's about having the freedom to do that -- or to keep working as much or as little as I like.

For me, it's also about knowing that, well past age 64, there'll be enough money to take care of me if I beat the actuarial odds and wind up at the Sunnyvista home for geriatric columnists.

That's why I have a retirement plan, and so should you. No matter how old you are, if you haven't sat down and figured out, at least roughly, how much money you're going to have at retirement age (and how long that money will last), then you're flying blind over the Himalayas.

Did you know that the maximum annual Social Security benefit at the moment is $17,196? That won't even cover the gas bill for your Winnebago.

Before you panic because you feel you haven't saved enough money, take some time to figure out just how far behind you really are. Chances are that a comfortable retirement isn't completely out of your reach...yet. Besides, like Ringo, you might choose to keep working beyond ordinary retirement age -- even if only part-time.

Give Me Your Answer, Fill in a Form

Fortunately, you can cook up a reasonable retirement plan fairly quickly by using a few Internet resources. For Mac users, the best retirement worksheet I've tried is the one at Quicken.com. It's a simple, step-by-step guided form, but you'll get more meaningful results if you provide the most accurate and meaningful data. So, here are some tips on filling in those blanks.

First, click on the Retirement tab at Quicken.com and then click on the Build a Retirement Plan link in the list in the upper left.

The first screen asks for your birth date and makes a crude attempt to guess your life expectancy based on your sex and whether or not you smoke. There are better life-expectancy calculators on the Web (try www.beeson.org/livingto100 ). I like that one because it gave me the longest expectancy (90 years), but I've gotten answers from other calculators that had me kicking the bucket as much as 18 years earlier, too.

The point is that you should take these things with a grain of salt. In fact, I recommend that you simply enter 95 years here. That's probably more years than any calculator will give you, but don't forget that, by definition, there's a fifty-fifty chance that you'll exceed your actuarial life expectancy. If you have only enough money to last that long, then there's a good chance you'll outlive your funds.

Screen 2 asks about your current income and assumes a 3 percent annual increase rate that you can adjust if you like. It also calculates how much money will need during retirement based on the assumption that you'll want 70 to 80 percent of your current income, and the link reading Explain can tell you more.

Think twice before you accept the 70 to 80 percent figure. Many people find that they've underestimated their retirement needs. Do you really want to reduce your standard of living during retirement? Or do you want to take lots of trips? Indulge in a hobby? Eat out more often? It's probably more realistic to assume that you'll want at least the same income.

Screen 3 estimates taxes and inflation. You should assume that your post-retirement tax rate will be the same as it is now. After all, most people's retirement assets will come from 401(k) plans, which are taxed as regular income.

And you're planning to spend the same as you did before retirement, right? Quicken automatically assumes a 3 percent inflation rate. Go ahead and stick with that, but be aware that it might be unrealistic because it's based on recent years, during which inflation has been very low. Alan Greenspan can't live forever.

Screen 4 asks about assets such as 401(k), IRA, and Roth IRA taxable savings. This should be straightforward if you keep track of your money in Quicken. If not, take some time to total everything. If you've been contributing to a 401(k), give yourself a pat on the back.

Screen 5 does a crude calculation of your expected Social Security benefits, as well as any pension money you might have coming your way. Last April, the Social Security Administration unveiled three new Social Security benefit calculators at www.ssa.gov. Unfortunately, the most accurate of these is a Windows-only program (the government says it'll be working on a Mac version -- probably right after they get that missile-defense system debugged). The least accurate isn't any better than what Quicken.com offers. The middle program (a Java applet) isn't supposed to be Mac-compatible, but I got it to work when I tried it.

You can use one of these Social Security calculators to get a more accurate estimate of your benefits. Or just enter the estimate that the government is supposed to mail to you about three months before your birthday if you're more than 25 years old (they started doing this last October). If you haven't received one, you can request it from this same site.

Screen 6 is a big crapshoot -- you're supposed to guess what return you expect on your investments. Although a lot of investments have done very well during the past few years, there's no guarantee that will be the case going forward. For now say 8 percent, which is in the middle of Quicken.com's risk range. If you end up doing better than that, well, you can just buy a bigger Winnebago.

Screen 7 is where you get the good (or not-so-good) news on whether or not your plan is "succeeding." If it is, great. If (as is far more likely) you come up a little short, don't panic! Start tinkering with your assumptions to see whether you can get closer to your goal by saving additional money each month. Are you making the maximum contribution to your 401(k), for instance? Quicken.com has Solve buttons that you can use to automatically figure out what value for a particular variable (such as after-tax contributions) will make your plan work.

Indicate Precisely What You Mean to Say

Quicken.com's calculator is far from precise, but it strikes a good balance between ease of use and credibility. If all it does is scare you into saving a little more money each month, then it's probably achieved its aim.

The program doesn't take into account such significant factors as a potential inheritance, though, and its economic forecasting is crude at best. If you really want to get into the nitty-gritty of planning your golden years, then pay a visit to www.analyzenow.com, where a former Boeing executive named Henry K. "Bud" Hebeler offers the Strategic Retirement Planning II (also known as Retire 2000) for $19.95. If you can master this Excel spreadsheet, your retirement will be backed with a better business plan than most dot-coms have.

Finally, don't forget to return to the retirement issue periodically. You should reevaluate your retirement plan once every five years when you're in your 40s and once every two years as retirement draws near. And if you do reach 64, I'll see you at the Ringo concert.

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