When to Retire

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The gap between what many business owners say they will need for retirement and what they actually have saved is considerable but the picture does not need to look bleak. Here are five questions to ask when planning for retirement:

1. When should I start saving? Many people don’t start saving until they determine their retirement goals, write a will, and answer all the questions to get their lives in order. But the early saver without a plan is better off than the careful planner who delays. Just opening an individual retirement account (IRA) and developing the habit of saving is half the battle.

2. How much money will I need for retirement? Start with a list of current bills: rent or mortgage, food, car loan, gasoline, utilities, clothes, credit card payments, etc. Health-care costs, the decision to travel extensively, or retiring to an active lifestyle community could add to your retirement budget.

3. Can I use home equity for retirement income? You don’t necessarily have to sell your home to reap some retirement money. With a reverse mortgage, the lender puts a lien on a home whose owner has built a large amount of equity. Check with your financial advisor to see if this is the right choice for you.

4. What sources of retirement income will I have? Chances are your retirement income will come from several different arenas, including Social Security and personal savings plans. The classic investment is an insurance annuity. However, other retirement plans, such as an IRA, Simplified Employee Pension (SEP), and individual 401(k), have become more popular with microbusiness owners.

5. When can I retire? Americans traditionally think 65 is the age to retire. However, the rules have changed over the years so that the age 65 benchmark is no longer true, particularly for Social Security. Workers willing to delay receiving checks until age 70 can receive more. At the other extreme, people can start drawing smaller monthly payments as early as age 62.

Robert Hughes President National Association for the Self-Employed Grapevine, Tex.