Striding Into Retirement

Are you thinking about early retirement? Maybe the daily grind wears you down. Or, perhaps you're eager to explore new opportunities. Before you wish your colleagues' farewell, be sure your finances are as ready for retirement as you are. Two factors make early retirement more difficult to afford than retirement at age 65. You'll have a longer period in retirement (and life expectancies continue to increase), so you'll need to build more savings. And, you'll have a shorter time to amass those funds.

One strategy is to build a retirement pot big enough to take you through full retirement beginning at age 65. Then, between 55 and 65, just earn enough in a second career to delay dipping into your retirement funds. Early retirement is an attainable goal for many people, if you're seriously committed to it. Following these steps may help you get there.

Step One: The Plan
Your strategy should be based on concrete figures rather than vague dreams. Figure out as precisely as possible how much money you'll need above and beyond what you have coming already. Your company pension plan administrator (if you have a pension) and the Social Security Administration (1-800-772-1213) can give you an estimate of future benefits.

Step Two: The Budget
To reach your goal, you will most likely have to cut back on your spending and increase the amount you're saving. If you track your spending for a couple months, you'll probably find areas you can trim to free up more money. Remember that with a long time horizon, little savings can add up. If you begin at age 25 to forego $5 worth of snacks and designer coffee each weekday and tuck that money away instead, it could compound to $560,000 by age 65. *

Step Three: The Investments
You'll need to make your money work hard for you. You can do that by building a diversified portfolio that fits your risk tolerance. In general, investments that offer high potential rewards also involve greater risk. You can temper that risk in two ways: * Balance your portfolio by distributing money among stocks, bonds and cash equivalents (or mutual funds that hold those asset classes). By diversifying, you can take advantage of the fact that different asset classes tend to respond differently to market conditions. So, for example, an increase in bond prices may help offset a drop in stock prices. * Put time on your side. The earlier you start investing for retirement, the greater the amount of risk you may be able to tolerate. That's because you'll have more time to ride out market cycles.

Step Four: The Second Career
Decide on and, if possible, begin your second career while you're still working on your first. You could use your vacation time to explore options, moonlight or do volunteer work. Remember, you just need enough income to cover current expenses. If you're planning to turn a hobby into a business, get a serious start on it while you're still working so you're sure your plan is viable. If you want to work for someone else, there's good news: the job market for older workers is hot.

We'll Help You Get Started
An investment adviser can help you select specific mutual funds or other investments that provide a risk-reward potential best suited to your situation. Call or stop in today! Now's the time to make your move on an investment plan that will keep pace with your hopes for an early retirement. *Based on an investment of $100 per month earning 10% annually. Figures are for purposes of illustration only and do not represent the return of any actual investment.

**Source: Money, October 1997.

*Investment services offered through Union Bank & Trust Company’s Trust Division.
Investment products: Not FDIC Insured - No Bank Guarantee - May Lose Value.