ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Monday, July 15, 1996 TAG: 9607150018
SECTION: MONEY PAGE: A-8 EDITION: METRO
SOURCE: MAG POFF STAFF WRITER
THE time to start thinking about retirement is at age 35, according to Perry Gilmer.
"The sooner the better," said the assistant vice president of personnel services for Norfolk Southern Corp.
Not everyone does that.
Consider the General Electric Co. plant in Salem. The company gives twice-yearly seminars on retirement that are open to the entire staff. People usually begin to come when they reach age 50 or, more likely, 55 or 60, said Jean Stiff, GE's health care manager, who conducts the sessions.
And most GE employees opt to leave the job at 60 or 62.
Steve Jamison, compensation and benefits manager for American Electric Power Co. in Roanoke, said most retirees don't think in advance about the amount of money they need or the health insurance they should have.
The first thing people contemplating retirement should do is draw up a budget and decide how much money they will need to live comfortably, Jamison said. "Be generous with yourself" by budgeting for holidays and trips, he advised. Then look to sources for the money.
To determine how much money you will have from Social Security, pensions, retirement plans and savings, look at your cash flow, said Stiff. She advised people considering retirement to call the Social Security office well ahead of time - even five years - to get a readout of benefits. Decide how much you must save to make up any shortfall, she said.
Jamison said too many people tap into all possible sources of cash when they might, for instance, allow their Individual Retirement Accounts to accrue earnings for a little while longer. That's because he believes many people underestimate both their retirement benefits and how much money they'll save by not having to go to work.
He warned against turning all assets into cash without first analyzing cash flow for retirement. Many workers, he said, find they have as much disposable income in retirement as they had while working.
If you tap into a retirement plan instead of living on Social Security and pension money, one question to consider is taxation.
"It's not always wise to get all your money at one point in time," Jamison said.
People contemplating retirement also should assess their health and life insurance needs, Stiff said. Retirees qualify for part A of Medicare, that pays hospital costs, automatically at age 65, she said, but must apply to become covered by part B, the portion covering physicians' bills.
She warned that people will receive "a whole host of things by mail" from companies selling Medigap plans. In some cases, Jamison said, retirees remain covered by their former employer's plan. You don't need to pay for the same coverage, he said.
He suggested most people should self-insure for prescription drugs. The Medigap plans covering medications, he said, are more costly than warranted by the benefits they return.
"Insure for catastrophic losses," he said, instead of paying the high cost of insuring against the first dollar of loss. If you buy a plan, he added, make sure it doesn't duplicate other coverage you have.
Gilmer of Norfolk Southern said retirement planning really involves planning for getting older.
If you have never done so, Gilmer said, write your will now. If you already have a will, make sure that it still coordinates with your estate planning.
Retirees who have any assets should consult with a financial planner and a tax lawyer, he said. The goal is to "maximize the tax aspects of your demise." You want to determine the best way to pass on your assets to your spouse and the next generation.
One of the options to consider, Gilmer advised, is rolling over the money in your 401(k) plan into an Individual Retirement Account. There are tax advantages for most people in handling the money that way instead of taking the money in a lump sum because taxes continue to be deferred.
If you roll the money over, Gilmer said, it must be sent directly to the IRA trustee. If you take custody of the money, even temporarily, you face paying mandatory withholding tax.
Besides all the financial considerations, Stiff said, you also "need to look at all aspects of your lifestyle. How are you going to spend your days?"
In retirement, she said, you need "a full-scale, meaningful day. It's more than money."
LENGTH: Medium: 82 lines ILLUSTRATION: GRAPHIC: color.by CNB