An Advance Financial Checkup Is Vital.

• Position: Before retirement - Brief Article

As you approach retirement, you will quite likely be assessing your financial situation to determine if you have saved and invested enough to afford a comfortable future. Generally, financial professionals advise that, to maintain your lifestyle, you will need approximately 70 to 80% of your current annual income each year in retirement, although your own situation may differ based on personal goals and finances. Taking an in-depth look at your finances and an inventory of your retirement funds approximately five to seven years before retiring will give you time to make adjustments to help you meet your goals when retirement comes around.

According to Joseph P. Lizzio, senior vice president, Morgan Stanley Dean Witter, Garden City, N.Y., retirees generally turn to the following sources of income: Social Security benefits; earnings (including part-time jobs); personal savings and investments, including IRA account(s) or additional employee savings plans; and company retirement plans. Typically, Social Security may only account for 40% of your income in retirement. Personal investments and savings, company retirement plans, and other sources will have to account for the remaining portion.

After calculating projected retirement income, you need to examine current expenses and determine which items will increase or decrease, be eliminated, and be added after you retire. By reviewing this information early on, you can develop a sense of whether you will have the necessary income to cover your expenses once you retire.

Compare your expense calculations with projected sources of income and compute whether you will have a surplus or a deficiency. At the same time, determine at what point in retirement you will need to begin drawing on your retirement plan assets. If, after...