It’s never too late to start financial planning
By Russell Roberts
IF you’re in the 50-plus age group and have no retirement plan except keeping your money in the bank, it’s time to start planning.
”At that age, you’re getting close to retirement, so you need to plan for it,” says Roger Klein, editor of the Klein-Wolman Investment Letter and president of Interest Rate Futures Research Corp. and Timing Strategies Corp. of Hamilton.
Mr. Klein points out that at age 50, people are likely looking at 20 years or less of full-time employment until retirement, so they need to accumulate enough assets to take them through the end of their life. He adds that with longer lifespans, most people need to plan finances for at least two more decades of life.
”The best way to save is through some sort of tax advantage (vehicle),” Mr. Klein says. He adds that 401K plans are good options, as are IRAs (individual retirement accounts), particularly Roth IRAs.
”People over 50 can now put $6,000 a year in a Roth IRA,” he says. The advantage of such an account is that, when a person retires, he or she does not have to pay ordinary income tax on that money. Other retirement accounts do not have the same benefit.
Cornelia O’Grady, a chartered retirement planning counselor and a financial advisor with Ameriprise Financial Services of Voorhees, says that one of the first steps to take when planning for retirement is to decide what type of retirement you want.
”Envision your retirement. It helps you plan for it,” she says. She suggests creating a “dream book” that lists the goals of people in retirement. For example, if a person’s retirement goal is eating at a fast food restaurant twice a week, that will take considerably less money than the person who wants to sail around the world.
Mr. Klein does not recommend investing in life insurance as a retirement vehicle. Investing in the stock market long term, though, is perfect for people who want their money to grow. “There’s no way around that,” he says, adding mutual funds are the best investment option, because the funds give you a diversified portfolio.
Mr. Klein warns that people need to pay close attention to the cost of investing. “You want low-cost vehicles,” he says, “which means no-load funds and, preferably, index funds.” He notes that if you waited this long to invest “you’re running uphill,” so it’s critical to seek the lowest-cost investments so that a big chunk of the money you make isn’t being taken out for fees and other costs. Most people do not pay attention to costs or hidden fees, he says, and are unpleasantly surprised when they begin adding up.
When people invest in the stock market, Mr. Klein says, they should prepare to be in it for the long haul. Thus, they shouldn’t panic when the market drops, even though headlines scream and so-called investment experts on TV wail about a financial apocalypse. “All you care about is where it ends up,” he says.
Ms. O’Grady emphasizes the need for an emergency fund to cover unexpected occurrences, anything from a leaky roof to termite damage. Unfortunately, most often the emergency costs for the over-50 set are health related, so it’s important to be health conscious. “Medical expenses can quickly eat away at retirement income,” she warns.
Both Mr. Klein and Ms. O’Grady say Social Security will be around in some form, and people who are 50 or so now will likely get something from the system. But as Ms. O’Grady points out, home values, which people were previously able to use, will not be able to be used for that same purpose in the future since home values have collapsed during the past 12 months.
”The housing bubble (in the economy) was huge,” Mr. Klein says. The United States just went through a protracted “up” period in the housing market, so now it’s likely looking at a long “down” period.
Costly funeral expenses are something else that retired people have to plan for. In New Jersey, Mr. Klein says, the money to cover funeral costs can be separated out to be used just for that purpose.
”You put the money in, it’s invested in a CD, and when the person dies that pool of funds is used for the funeral expenses. Whatever is not used is returned to the heirs. The advantage is that you’re separating it out from your assets so that nobody else can touch it.” A funeral director can often help set up that type of account.
Both Ms. O’Grady and Mr. Klein say it’s best for people ages 50 and older who are interested in investing to talk with a financial planner. A planner can establish a schedule of rate of return, help choose promising investment vehicles and, in general, as Mr. Klein says, “avoid the panic” that people sometimes give in to when an investment suffers a rough period.
Above all, both experts agree, don’t let your money languish away in a bank at 1 or 2 percent interest. Get it out of there and make it work for you. Now. “It’s never too late,” Ms. O’Grady says.

