Retirement — Can you afford it?

Because of recent economic developments such lower home and stock values, it will be increasingly difficult for individuals to retire.

The following excerpts are from Kathy Chu, Can you still afford to retire? Better re-check your timetable, USA Today, July 10, 2008:

The bottom line is this: Unless you’re flush with cash, if you don’t need to retire, don’t.  * * *

Financial planners have long championed a rule of thumb: People will need 70% to 80% of their pre-retirement income to live comfortably in retirement. But rising health care and living costs have led many planners to raise that percentage to near or even above 100% of pre-retirement pay. * * *

If you plan to retire in a few years, consider keeping a few years’ worth of expenses in short-term liquid investments such as bonds, says Harold Evensky, a financial planner in Miami.

That way, the planner says, if you must retire while the stock market is falling, you won’t need to tap into your depressed portfolio. Plus, by the time you start to withdraw from your portfolio, the market might have turned around, boosting your investment values. * * *

Retirement calculators such as the one available on T. Rowe Price’s website can help investors figure out how much they can safely withdraw per year in retirement. Other tools, such as the ESPlanner developed by Laurence Kotlikoff, an economics professor at Boston University, factor in Social Security payouts to calculate how much you need to save and can spend each year to maintain a high standard of living in retirement.