Death is fickle, so plan for retirement

Q: I am 53 years old and was diagnosed with breast cancer in October.

There are limited resources that I have been able to find addressing retirement planning for people that may not reach retirement age. My husband works full time and I am currently on long-term disability but plan to go back to work at the end of the year.

What advice do you have for these situations?

A: I'm sorry to hear about your diagnosis. I hope you are in remission and able to return to work soon.

None of us knows how long we have on this Earth, but I know that having a serious illness, a heart attack or a family history of premature death makes the possibility of living a shorter time more of a reality.

The top two concerns in retirement are maintaining a desired lifestyle and not running out of money. You need a plan for the future, because we don't know how long we will live.

I know of a couple that took early retirement; he had a massive heart attack less than a month after retiring. They decided to accelerate their spending, because they assumed he didn't have much longer to live. That was 15 years ago, and he is very healthy. Now they are in their early 70s and almost destitute.

Determining what you need to save now to accumulate what you will need to support a modest lifestyle in retirement might be your best plan. This would allow you to spend more money now and do things while your health is good, rather than saving more for the uncertain future.

Develop a retirement projection, either using a free financial Web site or by hiring a financial planner.

I encourage people who want a general idea of what they should save for common financial goals to use free Web sites, but when it comes to irrevocable financial decisions, professional advice is usually worth the cost.

Most software programs will calculate federal income tax; make sure the program you or your adviser uses also accounts for state income tax.

If you decide to seek professional advice, find an experienced planner with credentials you have a high regard for and who charges for services in the way in which you would like to work.

The four main ways planners get paid:

* Fee only: charges an hourly fee for planning or an asset management fee for portfolio management. They get paid only by their clients, and you won't be steered toward products that generate a commission for the adviser.

* Fee-based: will charge for planning advice, but investment or insurance recommendations will often involve products that pay the planner a commission.

* Commission only: will not charge for planning advice but receives commissions from any recommendations.

* Salaried: (usually found at a bank) will not charge for planning advice but may receive a bonus or other incentive to refer you to a commissioned financial adviser associated with the financial institution.

Don't use a rule of thumb when determining your expenses in retirement; take the time and make the effort required to get a good handle on what you will spend in today's dollars once you stop work.

Remember to account for medical expenses, especially if you plan to retire before you are eligible for Medicare.

Assuming a low rate of return on investments (6 percent to 8 percent), an average inflation rate (3 percent to 3.5 percent; higher for medical) and a longer than average mortality age (85 to 95) in your projections will help provide you with a conservative illustration.

I wish you and your family all the best.