Imagine retirement is a decade away. While that may be an exciting thought, not everyone is financially ready when the time arrives. After all, pensions and social security aren't what they once were, and many of us lack the knowledge and discipline to plan adequately on our own.

According to Mike Collins, an Investment Executive with Fifth Third Securities, the decade before retirement is a crucial time for getting all your financial affairs in order. To help you accomplish this, he offers a wealth of information on how to take inventory, develop a plan and avoid the common risks associated with retirement.

Take inventory
When taking inventory, Collins recommends you carefully review all investments, retirement accounts, pensions, social security benefits and other income streams. Also evaluate spending habits, insurance costs and other ongoing expenses. Be sure to include family responsibilities, such as long-term care insurance for yourself or parents, and college savings plans for children and grandchildren.

"I know this can be a lot to consider, but the key is getting started," says Collins. "This is a busy time for many people, especially if they're juggling dual responsibilities of raising children and taking care of aging parents - an experience previous generations rarely faced."

If you're not already working with an investment professional, Collins says this is a good time to establish that relationship. "Investment professionals aren't there to tell you what to do. They're more like partners who work with you. So look for someone you can talk with openly and comfortably," he says.

Collins compares the initial meeting with an investment professional to an initial doctor visit. "But instead of a health history, we take your financial history. This information plays a crucial role in determining how we help you move forward."

Develop a plan
Collins explains that retirement plans vary from person to person. "We don't use a cookie-cutter approach. Instead, we structure each plan according to a person's time frame before retirement, current income and budget, family responsibilities, tax bracket, need to increase savings, life expectancy and so on."

He also adds that it's important to review retirement plans and retirement assets. "We can't accurately predict the future - no one can. Personal situations, tax laws and the stock market are always fluctuating. We use these plans to make the future as certain as possible. But when circumstances change, as they eventually do, we also recommend the necessary adjustments."

Consider the risks of retirement
When developing a plan, Collins says it's important to be aware of the common risks associated with retirement. "The main risk is outliving your income. Statistics show that a couple that is 65 years old today has a 50% chance that one of the spouses will live to age 92 and a 25% chance of living beyond 97." These statistics, compiled in 2000 by the Society of Actuaries, can be a scary thought for many people. Consequently, he advises some clients to consider a part-time job for supplemental income during their early retirement years.

Inflation and health care costs are other risks. "Compare today's expenses with those of 20 years ago. Houses, cars, groceries and health care are all dramatically higher," he says. "To maintain your purchasing power, your portfolio needs to outpace inflation."

Income taxes must also be considered. Many people have the majority of their savings in retirement accounts set up through work. But they haven't paid taxes on that money yet. When developing a withdrawal plan, it's important to have a strategy that supplements your income while minimizing taxes. It must also be conservative enough so you don't tap into your principal.

Asset allocation is also very important when you're retired. "Our goal is to help you grow your money as much as possible with the least amount of risk. Consequently, it's not a good idea to have all your eggs in one basket. I suggest a more holistic approach of mutual funds, managed accounts, insurance products, and emergency funds - so you can avoid withdrawing money if the market is down," he explains.

Collins says too many people spend more time planning a vacation than they do their retirement. But with proper foresight, retirement can be a vacation that lasts nearly a third of your life. Discussing it and planning for it may be extremely important.

For more advice on how to plan for retirement or find an investment professional, contact Fifth Third Securities at (513) 534-8761 or visit the Fifth Third website.

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