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Saving Tactics For People Of All Ages

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The Tampa Tribune

Published: December 21, 2008

The issue of saving for retirement has always spawned a lot of questions. People want to know how much money they need, where they should stash it, and how to make sure that it lasts as long as they do.

The recent volatility in the market, however, has clearly pushed a new concern to the top: Will I be able to retire in this lifetime?

If you have money in the market, you've likely seen 30, 40 or even 50 percent of it washed away with this economy. All this is worrisome, no matter what age you are. But if you're in your late fifties or early sixties and close to retiring, or if you've already taken the plunge, it's downright terrifying.

So what do you do? Here is advice for every age group:

•If you're already retired. The key for you is to cut back on withdrawals from your retirement account. As a New Year's resolution, make a pact with yourself - and your spouse, if you have one - to live on the same amount that you withdrew in 2008. No adjustments for inflation. You might seriously consider taking on a part-time job, if you can find one. It can, and should, be something that you find enjoyable, and it'll help fill in the blanks until your investments get back up to speed.

•If you're a few years out. A lot of people panic and think that because they're within five years of their retirement date, they need to pull out completely. But that's the wrong approach. You have to remember that you're not going to need the whole of your investments on the day you leave the workforce; you're going to need about one year's worth of living expenses. The bulk of your money is going to stay invested for another 10, 20, or even 30 years.

If you're still nervous, though, you might scale back on your 401(k) contributions and instead put that money in safe investments until you have the equivalent of a few year's worth of anticipated expenses, says Bill Losey, author of "Retire in a Weekend." That way, you have more of a cash cushion, if you need it.

•In your 50s. At this point, you're really just riding it out. You likely have 10 plus years before you'll start taking withdrawals, so you should keep up your contributions. Double check that your asset allocation is still one you're comfortable with, but don't pull out simply because you're experiencing a lot of losses right now.

Aside from that, one of the bigger concerns out there is having enough money to cover not only your basic needs in retirement, but also health care expenses, which increase as you age. This is where long-term care insurance comes into play and the best time to buy is now. Wait until you hit 60 and you'll pay more.

•In your 20s, 30s or 40s. This is the group that's really going to benefit from this market, although it may not seem like it quite yet. First, you need to make sure you have an emergency cushion, so if you don't have at least six months' worth of expenses in a liquid savings account, focus on that for now. Once that's established, move on to your retirement goals.

"This is a fabulous opportunity to buy low. You'll get more shares for the money you contribute to your retirement plan. You're going to buy up more shares of assets, which will grow over the years and make a significant difference in your long-term success," explains Christine Fahlund, Senior Financial Planner at T. Rowe Price.

With reporting by Arielle McGowen. Jean Chatzky is an editor at Money Magazine and serves as AOL's Money Coach. She is the personal finance editor for NBC's "Today" show.

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