Retirement planning course corrections to consider

It’s no secret that millions of Americans are approaching their retirement years with meager savings and high anxiety about their financil security. And a recent study from Merrill Lynch and Age Wave reveals steps that Americans are willing to take to get their retirement back on track.

The overwhelming majority (88 percent) of people surveyed said their primary objective is peace of mind, while just 12 percent say they want to accumulate as much wealth as possible. But peace of mind means different things to different people:

• 57 percent report they want to live comfortably within their means.
• 39 percent say they want to have the financial resources to live the life they choose.
• 34 percent want to feel they could handle a major unexpected expense.
• 28 percent don’t want to feel overwhelmed by debt.
• 25 percent want to feel confident they won’t outlive their money.
• 17 percent want to provide for their family if something happens to them.

Actually, this is a good planning list -- it would be best to address all of these goals.

One challenge is that talking about your finances is generally taboo in America: Only 8 percent of survey respondents feel personal finances can be discussed openly, while the remainder consider the topic a private matter or one that can be discussed with a spouse or partner or only very close family and friends. In fact, many people would rather talk about their preferences for end of life than their financial status.

It would certainly help if older workers and retirees would share their ideas and insights with their family and friends. After all, they’re all in the same financial boat.

What changes are people willing to make to enhance their financial security in retirement? Here are 11 steps the survey found Americans are willing to take:

• 90 percent would be willing to cut back on their expenses. Perhaps they can focus on spending just enough to meet their basic living needs and what truly makes them happy.
• 79 percent would seek financial advice. In this case, they’ll want to make sure their advisers are qualified and act in their best interests.
• 77 percent would increase the use of tax-protected retirement accounts.
• 75 percent would seek expert advice on how to pay lower taxes. Note that this may not be a good use of time for Americans with meager savings, since they could already be in a very low tax bracket when they retire.
• 70 percent would buy a financial product that provides guaranteed income for life. These people would be wise to seek low-cost income annuities that maximize their lifetime income.
• 66 percent would sell real estate or other personal belongings. Finding the best way to deploy home equity is a good use of time for older workers and retirees who own a home but have modest retirement savings.
• 64 percent would postpone taking Social Security. This is a smart move for virtually all retirees.
• 60 percent would take Social Security as early as they could. This strategy works only if you’re sufficiently disciplined to save your Social Security benefits, don’t spend them, and are skilled or lucky enough to out-earn the stock market. Oh, it also helps if you die fairly quickly after you retire. If you live to average life expectancies or longer, you’ll receive more income over your lifetime by delaying the start of your benefits, and that doesn’t even count the extra benefits to a surviving spouse that results from delaying the start of your benefits.
• 43 percent would withdraw the cash value from a life insurance policy. Such people would want to explore their options: Many policies allow the holder to convert the policy’s cash value into a lifetime annuity.
• 39 percent would ask social services or charities for support.
• 25 percent would declare bankruptcy.

In addition to taking these steps, older workers would be wise to develop a strategy for generating lifetime retirement income, explore their options for continuing to work and make sure they have adequate medical insurance that supplements Medicare.

As you can see, your financial security in retirement has many moving parts. It’s well worth spending hours and days planning for peace of mind in your retirement years, so you can go enjoy the rest of your life.