Business Editors/Financial Editors

NEWARK, N.J.--(BUSINESS WIRE)--March 31, 2009--Today’s challenging economic environment has forced many Americans to review their retirement planning goals with a more critical eye. To help navigate through these turbulent times, Robert Fishbein, vice president and corporate counsel with Prudential, offers the first in a biweekly series of tips on planning for retirement.

“When it comes to retirement planning, Americans need to look beyond the ‘number,’” said Fishbein.“We all know what the number is: That magic dollar figure that, when reached, means you’re set in retirement. Knowing your number—and reaching it—is good, but it’s only part of the equation. Mastering the accumulation phase without factoring in the distribution phase could render all your hard work saving toward your number moot.”

Fishbein argues that Americans need to think about a number of key issues when planning for retirement and offers the following tips:


Think about retirement in terms of income needs. The accumulation of, say, $300,000 is not meaningful for living in retirement unless you can translate that figure into a yearly or monthly income stream. You need to be able to pay your monthly food, rent and utility bills, as well as health-care expenses—and have enough left over to live the way you want to live in retirement.

Make sure you factor in the built-in tax liability of some of your assets. In other words, view your retirement assets through a “tax lens” so you can see their true economic value. You can’t pay your rent or utility bills with before-tax dollars, so it’s important to understand what you’ll be left with after taxes before concluding you’re saving enough.
Determine whether your living expenses will likely decrease or increase throughout your retirement years. One view is that retirees are more active early in retirement, and living expenses decline over time as travel and other spending opportunities diminish. Another is that living expenses increase during retirement because medical needs typically increase with age. There’s also a barbell approach—recognizing that spending may be higher both at the beginning of retirement, when you’re more active, and at the end of retirement, when health-care costs increase.
Know that health-care costs can be the most difficult retirement expense to estimate. The Employee Benefit Research Institute suggests that a 65-year-old couple will need approximately $376,000 to cover medical premiums and out-of-pocket expenses in order to have a 90 percent chance of having enough money to cover health expenses in retirement, assuming the couple has average longevity and that coverage is available through a former employer, but fully funded by the retiree.
Once you’ve considered this needs-based process, determine how much of your retirement income should be guaranteed. If your plan includes one annual target income amount for basic needs and another, higher target for discretionary needs, then you’ll likely want to know for certain that your basic needs will always be met. So ensuring you’re generating guaranteed annual income at least equal to the amount needed to cover basic expenses may make sense.
To do that, you’ll first have to determine how much guaranteed lifetime income you are already expecting in retirement. For example, what is the annual payout you’ll receive from Social Security and your traditional pension plan? Does the total cover your basic income need or is there a gap? If there is a gap, one way to close it would be to elect an annuity payout, if available, from your 401(k) plan. Alternatively, you could purchase an individual annuity contract that guarantees a lifetime payout.

“The bottom line is retirement planning should always consider income needs,” Fishbein concluded. “And once those income needs are properly identified, you should look for ways to ensure that your basic retirement needs are covered in a manner that minimizes risk—or maybe even eliminates it altogether.”

Watch for Fishbein’s next tip—on the impact of inflation—the week of April 13.


Prudential Financial, Inc. (NYSE: PRU), a financial services leader with approximately $558 billion of assets under management as of December 31, 2008, has operations in the United States, Asia, Europe, and Latin America. Leveraging its heritage of life insurance and asset management expertise, Prudential is focused on helping approximately 50 million individual and institutional customers grow and protect their wealth. The company’s well-known Rock symbol is an icon of strength, stability, expertise and innovation that has stood the test of time. Prudential's businesses offer a variety of products and services, including life insurance, annuities, retirement-related services, mutual funds, investment management, and real estate services. For more information, please visit http://www.news.prudential.com/.

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Annuities are issued by The Prudential Insurance Company of America, Newark, NJ, and its affiliates. All are Prudential Financial companies and each is solely responsible for its own financial condition and contractual obligations.

IFS-A162984 Ed 3/09