Time to Rethink Your Social Security Plan

Penny Marlin, a fee-only certified financial planner with Lubitz Financial Group in Miami, prepared a retirement plan for a doctor who wanted to retire at age 58 from a practice he owned. Although selling the practice would provide him a large nest egg, her computer forecasts, through good and bad economic times, found that he only had a 96% chance of having enough money to last until age 89 and a 91% chance until age 94.

She recommended that he work part time as a doctor, earning only a fraction of his former income, $30,000 after taxes, through age 67. With that income, the computer model spit out much better odds, a 100% chance for age 89 and a 99% shot for age 94.

Marlin, who works with many pre-retirees, says, "Using extended life projections where the clients don't run out of money is tricky. What choices do they have? Work longer. Spend less. Die younger," she deadpans. "Most don't elect for that."

Michael Helffrich, a CFP with PFP Advisors in Minneapolis, had a client approaching retirement age who was in the construction business and came to him with one question: Could he take a permanent vacation at age 65? Helffrich ran the numbers and found it wasn't quite that simple.

The client needed to earn another $12,000 a year until age 70 to meet his retirement goals. Although it wasn't much money, says Helffrich, "It was that much that made the difference. It will work that much better. Each year is an extra year of not drawing on retirement money."

One Senior Sets the Agenda

For workers already anxious about the future, Fed Chairman Greenspan's Aug. 27 remarks at a Jackson Hole, Wyo., symposium were no comfort.

Noting the nation's population of age 65-plus citizens will double by 2035, Greenspan said he fears we have promised more to prospective retirees than workers will be able to afford in real income, and "we must recalibrate our public programs so that pending retirees have time to adjust through other channels."

Don't assume you can "road test" your retirement, then go back to work if money runs low. You will have less energy as you age, and that gap in your resume probably won't appeal to employers. Be flexible. If you eventually want to retire from the Northeast to Florida, advises Beverly Goldberg of The Century Foundation, but the transition it too expensive, do some creative planning. Work for a few years where your skills are in demand. "Where can I go that makes sense? How do I get there from here? It's going to take a lot of thought," says Goldberg. "On my way to Florida, make a two-year stop in Omaha. Make it an adventure."