How to not outlive your retirement funds

Friday - 12/17/2010, 11:39am EST

Arthur Stein ,Certified Financial Planner, SPC Financial

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By Suzanne Kubota
Senior Internet Editor
FederalNewsRadio.com

Now that you've been saving for retirement, you might be wondering if you've saved enough. You're not alone.

Arthur Stein, certified financial planner with SPC Financial in Rockville, Maryland notes many feds plan on retiring at the end of this month.

At least, they hope to.

"Federal retirees are never going to run out of income," Stein told Federal News Radio. "They'll always have their pensions and many of them will have Social Security in addition. What we're really worried about is that we reach a point where our expenditures exceed our pensions and then we have to start taking money from investments and we run out of investments, then we have financial disaster."

How to Avert That Disaster

Stein said the key is to determine how much you're spending, "now while you're working." He suggests keeping a budget to track your spending over 6 to 12 months. Do it by category, then use that to estimate how much you're going to be spending in retirement.

Compare that expected expenditure to what your pensions are going to be. "And if your expected expenditures are less than your pensions, that's a good thing,' said Stein. "If your expected expenditures are higher than your expected pension, that's a bad thing. You really need to think about postponing retirement."

Postponing retirement is not uncommon, explained Stein, "because lots of retirees find that their cost of living goes up more quickly than the overall inflation rate." Health problems and insurance premiums are just two examples of reasons for that.

And then there are the other unexpected costs. For example, consider for a moment how much you spent 20 years ago on television and phone service. Compare that to today. There will be similar unexpected costs cropping up in other places. Whatever it is, wherever it is, said Stein, one thing is for sure: "it's going to be a lot of money."

Think About Investments

Look at what you have, suggested Stein, in terms of the amounts, allocations, and expected returns. "It's very important that money that you expect to need from your investments in the next 10 years should be invested very differently than money you expect to need from your investments in the next 20 or 30 years," said Stein.

When in doubt, do nothing

"One of the huge advantages of being a federal employee is the ability to postpone retirement and to continue working, in many cases, for as long as you want," said Stein. "And that is a great economic strategy."

Every extra year you work increases your pension, allows you to put more money into the TSP, and gives you a better idea of what's going on. And, said Stein, more time to plan.