Prosperity: Investment inspection


A six-point inspection can keep your retirement savings running as smoothly as a new car

By Michael MacFarlane, Northwestern Mutual Financial Network

The fact that 63 percent of Americans age 55 and older have saved less than $100,000 for retirement* shows that many people spend more time dreaming about their retirement than saving for it.

Here are some tips to help you determine whether you’ll have enough money available to fund your retirement dreams.


Identify Your Retirement Needs

Take time to figure out how much money you’ll need in retirement, based on your circumstances and lifestyle. Experts estimate that retirees generally need at least 70 to 80 percent of their pre-retirement income.

One option is to use Northwestern Mutual’s Lifespan Calculator to estimate how many years you may need retirement income.


Know Your Social Security Benefits

Social Security may still be a strong retirement tool for you. To find out what your Social Security benefits will be, visit


Learn About Your Employer’s Pension

Pension laws are complicated. Learn the facts about your company’s pension plan to make sure you obtain the benefits to which you are entitled.

You’ll want to find out what your eligibility requirements are, when your benefits become vested, how your pension benefit amount is calculated, how much money you can expect to receive, if your benefits will increase once they begin, when you can elect to retire under the plan and the types of income plans that are available.


Use Tax-Deferred Savings Plans

How you save can be as important as how much you save. Contribute as much as you can to a savings plan, such as a 401k. Since you will invest with pretax money, you can also lower your current tax liability. You might also consider using other financial tools to supplement your retirement income, such as IRAs, annuities, mutual funds and/or life insurance.


Don’t Touch Your Retirement Savings

Resist the urge to fund life’s many expenses with your retirement savings.

You’ll not only find your retirement will be underfunded, but IRS early withdrawal penalties also may apply to money taken out from tax-sheltered investments before you turn 59 ½.

Consider Basic Investment Principles

Many people know how much money they have, but they may not know what they can expect in the future. Understanding investment principles can help you select investments to match your risk tolerance, time horizon and goals, as well as manage the impact of inflation.

As a general rule, your money should be allocated among different types of investments and appropriate to your risk tolerance, time frame and investment objectives. This will change over time and will need to be rebalanced periodically. For example, the closer you are to needing the cash, the fewer fluctuations you will probably want in the value of your portfolio.

The key to living the retirement lifestyle you dream of is making the right decisions today.


* Source: Employee Benefit Research Institute and Mathew Greenwald & Associates, Inc., 2010 Retirement Confidence Survey. No investment strategy can guarantee a profit or protect against a loss in a declining market.


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