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Financial Planning and Saving for Retirement

Finacial_PlanningHow much money will you need to have for the retirement you envision? Where will it come from? The recent rocky economy, talk of Social Security reform, and a few high-profile pension fund failures have many Americans thinking more seriously about how they will fund their retirement. For years, financial planners have talked about retirement income as a "three-legged stool" that stands on Social Security, employer-related pension or retirement plans, and personal savings. Healthy and active, more people are adding a fourth leg to that stool—part time work.

Financial planning for retirement is about having a plan for your money. It basically comes down to five questions:

  1. Where do I (we) want to be?
  2. How much time do I (we) have to get there?
  3. Where am I (are we) now?
  4. What investment vehicles give me (us) a chance to get there?
  5. How much financial risk am I (are we) willing to take? (See Investments and Risk)

This section provides resources that provide an overview of financial planning and saving for retirement, explore each leg of the retirement income "stool," and that will help you answer those questions.

Overviews of Financial Planning for Retirement

The following resources offer broader overviews of retirement financial planning.

Retirement, Lesson 13 in Money 101 the financial planning "course" from CNN/Money offers a brief guide to the financial basics of planning for retirement. In addition to looking at basic investment strategies such as IRAs and 401(k)s, the article provides tips on what to do when you switch jobs and a Retirement Savings Calculator. If you want to see how well the information stuck in your mind, take the end-of-lesson quiz.

Savings Fitness: A Guide to Your Money and Your Financial Future prepared by the U.S. Department of Labor and the Certified Financial Planner Board of Standards, Inc. profiles the complete planning process.

Investing in You First: A Guide for Baby Boomers, Handbook 1 (4.8MB pdf file) in the National Endowment for Financial Education series, covers financial planning step by step.

Retirement Tips from the IRS. Short and sweet, these tips also provide links to Social Security and other federal resources related to Retirement Plans.

On surfing the Internet for planning advice

There are numerous sites on the Internet that offer myriads of planning tools such as savings calculators, online advice planners and planning software. Experts recommend the following:

  • Use tools from non-profits and those not sponsored by a particular investment company first.
  • Use more than one tool.
  • Evaluate the tools and resources by asking these questions:

    • Who is responsible for the information on the site?
    • What's the purpose of the information? For example, is it to sell you something?
    • Compare it with other sources. Are they similar or very different?
    • How old is the information?

Just remember that the output of a calculator or other interactive tool is only as good as the information that you put into it.

You might also read this article. Planning your retirement online by Melissa M. Ezarik on offers do-it-yourself planners a brief analysis of the value and shortcomings of the myriad planning tools available online such as savings calculators, online advice providers and planning software. It's recommended reading before you use any of the dozens of interactive tools available—even those we've reviewed.

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