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Brightening the Finances for the Golden Years : Retirement: Senior citizens often spend their nest eggs before realizing the benefits of financial planning.


WASHINGTON — An elderly widow, left with a sizable stock portfolio, refuses to make any changes for fear her late husband wouldn't approve. Her frozen finances ultimately spell fiasco.

A retired grocery-chain owner continues to turn over hundreds of thousands of dollars in certificates of deposit. Despite substantial taxes on the interest, he enjoys the sense of power of personally negotiating rates with bank officials.

A paper company executive is nudged into retirement six years early and left with 40% of his final salary the first year. Can he continue to support himself and his wife in their accustomed style or must he find a new job?

It has been said that the only difference between the "olden" and the "golden" years is one letter--the one from Uncle Harry making you his heir. Yet even people of means can get confused or anxious about money for want of financial education or counseling.

Workers now live longer and retire earlier than their ancestors. A quarter of one's lifetime may be passed in retirement. Money--how long will it last?--becomes the second most important concern after health, say sociologists. Though there is undoubtedly more financial advice available today than ever before, little is specially tailored to retirees.

A fortunate few can afford to entrust their money matters to lawyers, accountants, brokers and bankers. At the other end of the scale, government or community-sponsored credit counseling and bill-paying services are offered for the poor, as well as state-appointed guardians for the incompetent.

That leaves the majority of the older population ill-served on managing money, from budgets to investments.

Investment advice in popular books too often consists of explaining "types," such as Treasury bonds or commodity futures. Newsletters with investment recommendations are directed at all ages. Consumer-oriented financial seminars often are too general to serve as a guide for individual money management. Moreover, they frequently are vehicles for selling products.

Personal financial planning, which can cost thousands of dollars, primarily is geared to the accumulation of wealth through saving and investing to reach certain goals: reducing taxes, educating children, providing for retirement. The next event, chronologically, is estate planning, which may not become applicable for 20 or 30 years. What about the interim?

Medicine and law have gerontology specialties; but few financial planners yet devote their practice to seniors.

"I think it will become a specialty in the future," predicts Patricia Tengel, who runs a Montgomery County seminar on money management for women, sponsored by the U.S. Department of Agriculture and the American Assn. of Retired Persons (AARP).

Pre-retirement counseling comes closest to educating people on how to manage their money for the rest of their lives.

"It's not unusual for a long-time employee earning $25,000 to get a lump sum of $350,000 (from pension and savings plans)," says Charles Katz, president of University Research Associates, a retirement planning firm in Tempe, Ariz. "Often people like that don't have a clue as to how to make their benefits last 25 to 30 years.

"It's scary," Katz says, "how they go out and buy a new luxury car and a vacation home, and in a matter of a few years (their nest egg) is gone. So financial education is invaluable even at that stage."

Yet only 10% to 20% of all corporations offer financial planning-counseling on the eve of the golden handshake. Half of those, notes Katz, hire financial institutions or planners to provide the free service, often in exchange for not-so-subtle product promotions, such as annuities or mutual funds.

Failure to plan adequately is reflected in a recent study of 6,000 union members who voluntarily retired before age 65. Almost a quarter thought they had retired too early for a number of reasons; the retiree's deteriorated financial condition was a major factor, notes Philip W. Wirtz, George Washington University associate professor of management and one of the study's authors.

"It's a black hole," says Jim Thompson, AARP's manager of consumer affairs, referring to the dearth of financial guidance in retirement.

Light may be about to be shed, however: Madison Avenue has discovered the mature market. Wall Street and Main Street are not far behind. Innovations such as tax-deferred annuity certificates and reverse mortgages are pitched to seniors along with municipal bonds. Increasingly, customers are targeted not only by age group, from pre-retirees to the frail elderly, but also by affluence and life style.

Sen. Lloyd Bentsen (D-Tex.) has suggested that the surtax on Medicare catastrophic illness premiums could be lowered because of higher revenues due to the "previously understated number of elderly in higher income classes."

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