March 8, 2000 The sooner you start planning retirement, the easier it will be The sooner you start think- ing about this subject, the better. Successful and early planning will possibly allow you the valuable option of re- tiring early. Retirement Planning needs to address two questions: (1) How much will be needed for retirement?, (2) What will be the sources of retirement income? 1) How much will be needed for retirement? Usually you'll need 60% to 100% of current income to live comfortably in retire- ment, provided you're now at a reasonable comfort level. The percentage varies widely depending on your current situation. In other words, there are several expenses you may have now that will not be a factor when retirement ar- rives. First of all, there are the expenses attributed to children: food, clothes, edu- cation, etc.. Secondly, there's your current retirement sav- ings “expense”. Thirdly, there are the debt expenses you may currently have (such as credit cards, student loans, etc.) that should be paid off by the time you retire. Option- ally, if you plan to live in your home during retirement and it's paid for, you'll save on housing costs. ’ Once you determine your comfortable monthly income for retirement in current dol- lars (present value), the fu- ture value of said amount can be found. Find the closest five year interval between now and your planned retirement date below, multiply your present value by the decimal number associated with the five year interval (multiplier): the result is about what you'll need per month when retired (future value). For those familiar with fu- ture value calculations, I've used 3.25% as the average annual inflation figure. Editor's Note: Unless otherwise noted, articles in this section were provided by the advertisers, not by The Dallas Post. Future Value Multipliers Years to Retirement Multiplier 05 years 1173 10 years 1.377 15 years 1.616 20 years 1.896 25 years 2.225 30 years 2.610 35 years 3.063 Example: in current dol- lars, a couple figures they would need $1,500 per month to live comfortably if retired. They plan toretire in 30 years.- Their calculation is: $1,500 x 2.610 = $3,915 needed per month in 30 years. 2) What willbe the sources of retirement income? For most individuals, there are four basic retirement in- come sources: Social Secu- rity, Pensions, employer tax- deferred savings plans (such as 401k’s), and personal sav- ings (including IRA's). * Social Security - you can obtain a statement from them listing reported earnings for each year worked and provid- ing an estimate of benefits based on when you plan to retire. To receive the state- ment you must submit a So- cial Security Request Form SSA-7004, “Request for So- cial Security Earnings and Benefit Estimate Statement”. Call them at 1-800-772-1213 to request the Form. Some suggest obtaining one of these Statements every 5 years to stay current with your ben- efit. There's considerable de- bate over the long-term fi- See RETIREMENT, pg 6 Got any plans for retirement? This isn't where you end up when you retire, unless you plan it that way. The key is financial independence. And that will be more difficult than ever when you're ready for the hammock, because of inflation and rising health care costs. People are living longer in their retirement years, too. Call us and plan for the future. You'll rest easier. Alexander H. Sickert, CLU,CHFC, FIC Registered Representative P.O. Box 702, Dallas, PA 18612 4 14 Bus: (570) 696-4204 Fax: (570) 696-1222 fay LUTHERAN BROTHERHOOD A Family of Financial Services for Lutherans ’ — S-year 774 Your home is your castle. It’s also your ticket to an attractive Home Equity Loan or Credit Line. Once approved, you can start planning that addition, family vacation, or other heart’s desire. It’s your Home Equity. Enjoy it. “we Guaranty it!” Guaranty Committers & Clot Commonly Glen Lyon - 736-6521 Mountaintop - 474-6232 Nanticoke - 735-1400 Pikes Creek - 477-2245 Shamokin - 648-9500 Wilkes-Barre - 819-3000 *Rate shown is for terms of up to 60 months with automatic deduction from Guaranty Bank checking or savings account. Appraisal fee may be charged at option of Guaranty Bank. Loans in excess of $50,000.00 require title insurance. © 2000 THE BANK AD AGENCY EQUAL OPPORTUNITY LENDER MEMBER FDIC wn The Dallas Post March 8, 2000 7 Mutual funds (continued from page 8) essentially eliminates this type of risk. Certain funds such as sector funds, because of their specialization, have some amount of this risk; thus, they are more risky than diversified funds. 2. Category Risk - risk associated with the type (or category) of security within a given fund. To view a listing of Investment Category Risks, jump to my general investments page. 3. Market Risk - the risk of general market fluctuations, usually mea- sured as beta for common stock funds and average maturity for bond funds. + Beta - a measure of the relative volatility (risk) inherent in a specific mutual fund when compared to a general market measure, such as the S & P 500 index for stock funds. A beta of 1.0 should roughly match the return and risk of the ” “ market”, while abeta of 1.25 would have areturn and risk about 25% more than the “mar- ket”; 25% above it on the upside, and 25% below it on the downside. + Average Maturity - for bond funds this is the primary measure of risk because bonds are affected most by the trend in interest rates and bond funds of longer average maturity are affected more severely than those of shorter average maturity. Like beta, a higher average maturity fund stands to gain more on the upside and lose more on the downside. Selecting Mutual Funds Don't forget your overall Asset Allo- cation while choosing Mutual Funds. The selection process often begins with the fund's investment return record; though, make sure you're com- paring apples to apples in this part of the process. In other words, compar- ing investment returns between two funds without paying attention to their other key factors: expenses, risks, and management; is a mistake. In addition to the above mentioned items, omit funds that do (or don’t do) any of the following: funds whose investment objective given in the prospectus is not specific, understandable, and consistent with your needs. e funds that aren't quoted in the financial press (e.g., The Wall Street Journal, Barron's, Investor's Busi- ness Daily). Common Mutual Fund Investor Services e Phone Exchange: moving money between different funds within the same fund family. Remember, ex- changing out of a bond or stock mu- tual fund is a sale; thus a taxable event for non tax deferred accounts. e Check Writing: available with many money market and some short term bond funds. Often, a minimum check amount of $250 is required. e Auto Exchange: similar to phone exchange, except it's set up to occur on a regular (usually monthly) basis automatically. This is one way to dollar-cost-average. e Auto Invest: regular (usually monthly) electronic drafts from an investor's bank checking account to purchase fund shares. Requires pre- authorization between bank and mu- tual fund company. Another way to dollar-cost-average. e Auto Withdrawal: the opposite of auto invest, money is regularly de- posited into investor's bank checking account from the mutual fund com- pany (possible taxable event). Special Note In addition to investing through individual Mutual Fund companies, you can now transact in No-Load Mutual Funds by opening an account (regular or IRA) with most Discount Brokers. Be sure to choose the “no transaction fee” Funds, as some Funds available through these brokers are not exempt from transaction fees (that’s both No-Load and no transac- tion fee). Copyright ©1998, Michael C. Carli, All Rights Reserved (Updated: Janu- ary 25, 1998) Send Suggestions, Ques- tions, and Comments to: Bonehead_ Finance@compuserve.com. Sandy Baltimore Celebrates 10 Years of Service with The MONY Group MONY Life Insurance Co. 161 Main Street, Suite 302 Luzerne, PA 18709 www.mony.com 570.714.2274 Office Sandy Baltimore 570.696.4189 Residence 570.714.2275 Fax sbaltimo@mony.com ION Cr mmm (ROUP Registered Representative Securities offered by: MONY Securities Corp.Member NASD, SIPC. A Member of The MONY Group 1740 Broadway, NY,NY 10019, 1-800-736-0166 Merrill Lynch provides TO CRVEVER OB 1 ELGAR NERGEIR I ELR Td — Than any other financial services firm * Financial Planning * Money Market Funds e Mutual Funds » Tax-Free Bonds * Insured CDs e Business Financial Services Trust Services e JRAS/SEPs and IRA Rollovers Stocks * Estate Planning » Annuities/Life Insurance » Mortgages and Credit/Finan¢ing For information, call your local Merrill Lynch office. The Difference is Merrill Lynch. Gary T. Crisci Senior Financial Consultant MaryBeth Bonczek Financial Consultant 829-8030 836-0887 800-234-5381 Merrill Lynch 122 E. Tioga St. Tunkhannock, Pa. 18657 600 Baltimore Dr. Wilkes-Barre, Pa. 18702 Merrill Lynch A tradition of trust. ®1996 Merrill Lynch. Pierce. Bonner & Smith Incorporated. Member SIPC.
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