Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SUNDAY, June 17, 1990 TAG: 9006270053
SECTION: SENIOR STYLE PAGE: SS-18 EDITION: METRO
SOURCE: By KIM SUNDERLAND
DATELINE: LENGTH: Long
Retirement, investment, taxes and options for those on a limited income, are some of the financial burdens that should be considered now before you retire.
With health costs escalating, everyone needs to prepare now for their older age and eventual retirement. The Money Management Institute, which is the educational arm of the Consumer Affairs Department, supplied a report that listed a number of helpful hints.
Preparing for retirement means figuring out your net worth (your assets and debts), calculating your retirement needs (which is what you spend now on taxes, food, housing, etc.), and knowing your sources of retirement income.
None of this is easy, but the institute offers some strategic moves to accomplish this.
Start with sources of information. The library, especially if you're a first-time investor, is a good place to start. There are numerous books, magazines and newspapers to introduce you to savings and investments.
Investigate the various adult education programs offered at the community colleges. Advisory newsletters, available in the library and by subscription, describe investment climates, economic outlooks and industry trends. Joining an investment club is another possibility.
After that, the institute suggests developing an investment plan that reflects your financial goals and personal circumstances, taking into consideration such factors as age, years to retirement, health, income, anticipated income, emergency provisions, investment goals, children's education and any other obligations.
Most of us are probably not totally satisfied with our net worth and will likely vow to make some improvement in our financial status, according to financial management specialists with the Virginia Cooperative Extension Service. But, in fact, it's very difficult to make real progress without setting some goals to reach.
The plan should have your objectives and goals well stated. Some investments provide income, others growth and still others tax savings.
For example, if you are young and do not require additional income to meet everyday expenses, long-term growth would probably be your objective. You would want to choose investments that offered consistent growth over a long period of time.
No one objective may have the entire answer so you can choose a combination. But review them periodically to make sure you're headed in the right direction.
The plan should also include investment characteristics such as safety of principal, return, liquidity and convenience. You need to decide which best fits your investment objectives.
Once that is complete, choose an investment mix. To ensure a diversified mix, consider investments that offer different levels of risk, such as:
High Risk - commodities, collectibles and precious metals.
Medium Risk - mutual funds, stocks and real estate investment trusts.
Low Risk - U.S. Savings Bonds, certificates of deposit, bonds, U.S. Treasury Bills, money market, mutual funds, money market deposit accounts.
Also, use financial planners. Interview several before committing yourself and your money.
Once you've mapped out the road to retirement, pick a program. The U.S. Private-Sector plans include those of businesses and industrial firms, and tax-exempt organizations like churches, and charitable, scientific and educational groups.
There are also Public-Sector Retirement plans, including those of the Civil Service Retirement System and the Federal Employee Retirement Savings, as well as all the state and local government programs.
Investing in individual savings plans can also ensure stability after retirement, according to the Money Management Institute.
Individual Retirement Accounts (IRAs), Keogh plans and annuities are a few of the options.
The big plus to these is that future retirees can earn tax-deferred interest on retirement funds and, in some cases, even the contributions are tax deferred.
The federal Social Security and the Supplemental Security Income (SSI) programs also provide supplementary income for retirees. It offers a package of protection - retirement, survivors and disability insurance.
SSI is an income-assistance program for low-income aged, blind and disabled persons that provides monthly cash payments to those who meet income and asset eligibility requirements. SSI provides a guaranteed floor income. Social Security offices have details.
Each program, consequently, should be supplemented with a private pension and with savings, other insurance and investments.
Tax tips are important to know, too. Financial planners, tax preparers and consultants can help you find them, as can adult organizations like the League of Older Americans and the American Association of Retired Persons.
One highlight is property tax relief. It's available for those who are disabled or at least 65-years-old, from most Virginia cities and counties.
The cities and counties are authorized to offer, at their discretion, some form of real property tax relief to homeowners, such as a tax exemption, tax deferral or both. The method and amount is determined by the local government authority. And you must apply. The Virginia Department for the Aging has information.
Lastly, cutting costs will enable you to live within your income.
Some of the things you need to do are plan for inflation, cut expenses, buy less on credit, carry less cash, plan purchases, rent items rather than buy them, compare before buying and reduce transportation and telephone costs.
Remember, you're never too young to start planning for your future. And if retirement is just another stage precluding a jump into a whole different life, then having the money to enjoy it is vital.
by CNB