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You're Over 50. Now What? Carrie Schwab-Pomerantz Tells You

Carrie Schwab-Pomerantz (yep, Chuck's daughter) doesn't want you to lie awake at night, worrying about whether you'll be able to afford to retire. Instead, she wants you to consult her new compendium for advice, not unlike the way patients thumb through a medical reference guide to learn about a particular disorder.

Christopher Irion 415 643-8986

The chapter titles in  The Charles Schwab Guide to Finances After Fifty are similar to the questions in  Ask Carrie, her syndicated personal finance column.

Are you in your 60s and way behind on your savings? There's a section on that. How can you save for your kids' college without jeopardizing your retirement? There's advice on that, too. What's the smartest way to draw income from your portfolio once you retire?

"It's organized by 50 questions that people have about their finances in their later years," says the daughter of Charles Schwab, the founder and chairman of one of the country's largest investment brokerages. "You don't have to read it cover-to-cover. You can go in and out of it. You can read the chapter or two that's relevant depending on where you are in your life."

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What do you do if you're 10 years to 15 years from retirement and haven't saved nearly enough? Or maybe you tapped your 401(k) savings account to help pay for your kids' tuition bills? Or perhaps your investments tanked during the downturn and haven't recovered fully? How do you accrue significant savings in such a short time?

"It's a misconception to say it's too late to save," Schwab-Pomerantz, a certified financial planner, told AARP in an interview.

"There's definitely a level of catch-up if you haven't focused on retirement savings or if life circumstances got in your way," she says. "If you take advantage of the 401(k) catch-up contribution, and you're 50, you can put away $23,000 a year for the next 15 years. At a 6 percent rate of return, that money can grow to over $550,000."

She cautions, however, that "you have to have a mindset that retirement saving is non-negotiable."

If you can't divert much from your paycheck to put toward retirement, look for places in your budget to cut, and put that money into savings, she says. It won't be easy. If you haven't saved anything and you're in your 50s, you'll need to pony up as much as 40 percent of your income to build enough of a cushion to last two or three decades in retirement at your current lifestyle.

So exactly how much do you need to save? It depends on how much income you want. Let's say you'll want to live on $40,000 a year as a supplement to your Social Security benefit. You'll need to save a whopping $1 million (or $40,000 a year multiplied by 25 years, not counting any additional gains you may earn on the money before you tap it).  That presumes you have no other income from a pension or annuity, for example.

"People don't seem to understand how much retirement is going to cost. It's an expensive endeavor and people aren't crunching the numbers," says Schwab-Pomerantz, who is also a senior vice president at her dad's investment house.

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Boomers haven't saved enough, to be sure. But they're also the first generation to rely largely on do-it-yourself 401(k) savings plans in place of guaranteed defined benefit pensions that supported many of their parents in retirement. And because boomers were never taught about money management in school, at home or through their employers, Schwab-Pomerantz says, it's sort of amazing when they get it right.

"We're the first generation that has to create a paycheck from our savings," she says. "If we don't take control ourselves, no one else will. It's up to us."

Among the tips in her book:


  • Increase your 401(k) contribution in increments if you can't stash away the entire $23,000 a year allowed for people 50 and older.


  • Go to online calculators like the one AARP offers to explore different retirement savings scenarios. You might be surprised to learn how working and saving for a few extra years can boost your bottom line.


  • Rebalance the asset allocation in your portfolio yearly to match your goals and risk tolerance.


  • Postpone taking Social Security until you reach your full retirement age or until you max out the benefit at age 70 if you're in good health or are still working. Consider taking your benefit early if you're in poor health or if you're the lower-earning spouse and your partner can wait to file for a higher benefit.


  • When you take a required minimum distribution from your retirement account at age 70 1/2, look to see where you're under-weighted or over-weighted in asset classes in your portfolio. Your strategy should be to sell the lowest-rated securities in your over-weighted classes.


  • Create or update an estate plan. Draft an advance directive to let doctors, family and others know your wishes about emergency situations or end-of-life care. Create a durable power of attorney to give a trusted person authority to handle your finances if you become incapacitated.



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