07/15/2005

Where are you on the road to a comfortable retirement? Are you nearing the exit sign to a retirement you've dreamed about, or is retirement still a long drive away?

Regardless of how far you still have to travel, there are three “rules of the road” that you must follow to reach your destination safely.

Rule #1: Know what Social Security will provide.

Social Security is the foundation of retirement planning for most American workers. More than 95 percent of workers are covered under Social Security and more than 30 million Americans now get monthly Social Security retirement benefits.

How much could you receive from Social Security when you retire? If you're age 25 or older and you work, you should be receiving a Social Security Statement in the mail each year about three months before your birthday.

The Statement shows how much you paid in Social Security taxes through the years and what you might receive in benefits at various retirement ages. We recommend that you keep a copy of the Statement with your financial records.

To learn more about the Statement visit www.socialsecurity.gov/mystatement .

Rule #2: Know what you must save.

Social Security never was intended to be your only source of retirement income. Along with private pensions and savings, it was meant to be part of a “three-legged stool” that supports your financial future.

Most financial planners tell people to figure out how much money they'll need in retirement – usually 70 to 80 percent of their pre-retirement incomes. But, for average wage earners, Social Security will replace only about 40 percent of what they make before they retire.

Only a little less than half of workers have private pensions, and about a third have not yet set aside any money specifically for retirement. If you don't intend to work after “retiring” it is best to start saving as much as possible as soon as possible.

Social Security's website offers several calculators to you help estimate your potential retirement benefit at www.socialsecurity.gov/planners/calculators.htm .

Rule #3: Don't forget about health insurance.

An unfortunate fact of life is that as we grow older we tend to have more health problems. If you plan to retire early, you should make sure that you will have either employer-provided or private health insurance, since you will not be eligible for Medicare until age 65.

If you intend to retire at age 65 or older, you need to understand how Medicare Part A and Part B coverage work. You should also know that you would be responsible for Medicare premiums, deductibles and coinsurance.

For example, the monthly premium paid by beneficiaries enrolled in Medicare Part B, which covers physician services, outpatient hospital services, certain home health services, durable medical equipment and other items, is $78.20, and can rise each year.

Fortunately, all Medicare beneficiaries can participate in a new prescription drug program that begins in January 2006. And beneficiaries who meet income and resource limits can get extra financial help in meeting the monthly premiums, annual deductibles and prescription co-payments under the new Medicare prescription drug plan. To learn more about this extra help, visit www.socialsecurity.gov .

If you want more information about Medicare you should visit the website at www.medicare.gov , or call 1-800-633-4227.