Preparing for Retirement

For years, many Americans have looked forward to their retirement, when they can stop working and relax. Instead of respite, however, many of today's retirees are starting to find their golden years fraught with financial difficulties and emotional woes.

Today's retirees can expect to be considerably more on their own than their parent's generation was, says Clare Hushbeck, an economist for AARP.

"For people near their retirement, in their late 50s and 60s, it's probably not such a radical change from what their parents had," Hushbeck explains. "The younger boomers and the people behind them face a radically different sort of environment."

Anticipate the Cost of Retirement

After years of pumping money into the U.S. economy, baby boomers are beginning to leave the workplace and to use the same social and health benefits awarded their predecessors. Yet expected to support the boomers is a smaller labor force. This has analysts worried about the solvency of services such as Social Security, Medicare, and Medicaid, especially with people living longer than ever before.

The expanded life span also has people worried about being able to save enough money for retirement.

"The biggest challenge financially is health care costs," says Dan Blazer, MD, PhD, MPH, president of the American Association for Geriatric Psychiatry. He says the unknowns -- the number of years a person will live, and the quality of his or her health -- make planning for expenses more difficult.

For instance, some people fail to account for extensive stays in nursing homes, a cost that is not covered by Medicare.

Improving Your Financial Outlook

To improve your financial portfolio, the experts advise the following actions:

• Consult with a financial planner. To get unbiased advice, pay a flat fee for a visit, recommends Jack Vanderhei, research director of the fellows program for the Employee Benefit Research Institute (EBRI). In free financial planning sessions, the consultants have the burden of trying to sell you something.
• Do a self-audit of finances every year. Starting at around age 30, Hushbeck says it's a good idea to take a few hours every year to assess your financial situation. Think of where you are financially, where you want to be, and how much you expect to have and spend during retirement. This may sound like an unpleasant task, in the category of "eat your spinach," says Hushbeck, but it's a worthy action that can put you on the road to financial security.
• Take advantage of trusted resources. In addition to staying abreast of current events regarding Social Security, Medicare, and Medicaid, read informational brochures published by government and nonprofit agencies. Educate yourself at retirement workshops sponsored by your employer, unions, credit unions, churches, nonprofit groups, or government organizations. Also take advantage of tools such as retirement calculators that can be found online.
• Think positive. Your attitude can help determine your path in life, including your financial situation, says Robert Hotes, PhD, a fellow of the Association for Psychological Science ( APS), noting that even the stock market is vulnerable to the outlook of investors. "Take a look at the assumptions you make and what you tell yourself," he explains. For example, if it turns out your pension and Social Security benefits will not cover your retirement, think of taking on a part-time job in retail as an opportunity to fulfill a long-held desire to pursue a career in sales.