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Ready for Life, Part II?

Thanks to low-carb diets, multivitamins with soy extracts, and elliptical training machines, there's a good chance that you'll roam this wonderful planet longer than any of your ancestors dreamed possible. It's not a huge stretch to imagine spending almost as many years as a "retiree" than as a 9-to-5er.

There's Life, Part I: Learn to walk, do homework, write resume, work, fall in love, build nest egg, network, provide for family, have occasional elective surgery. And then comes Life, Part II: All that stuff you've always said you wanted to do.

Are you financially prepared for the second half of your life?

Put that way, it seems like it might be a good idea to put some thought into how you'll pay for half the birthdays you'll be celebrating. Surprisingly, fewer than half of us do. A 2002 survey by the Certified Financial Planner Board of Standards found that just half of the 1,000 upper-income survey respondents have a formal financial plan. And the majority of those who do review it only once a year.

The foundation of retirement planning is knowing whether you'll be able to cover your expenses. (Here are five "must knows.") It doesn't take much to remove the guesswork from your future -- it's right there in your checkbook register. Today's expenses hint strongly at tomorrow's bills. To find out the tab for this half of your life, group your expenses in logical categories (job-related, kid-related, insurance-related, housing-related, retirement plan-related). The more specific you are, the fewer surprises will rear their ugly head in the future.

Next consider the future costs of being you. Some expenses will go away -- commuting costs, putting the kids through college, retirement contributions -- and others (medical, travel, toys for the grandkids) will replace them.

With a rough idea of what the future will cost, you can do some cocktail-napkin accounting to see how far your current savings will take you. (Online retirement calculators can do all of the heavy mathematical lifting.) Three things can have a huge impact on your final figure: (1) how much you invest, (2) the rate of return you earn on your investments, and (3) the number of years those investments have to grow.

When it comes to retirement, you can hope that it's all it's cracked up to be. Or you can make sure it is. Feeling a bit more generous toward your future self? How about upping the contribution to your work retirement plan? Even a few extra dollars can make a big difference in the long term, and it's painless in the short term. (Those over the age of 50 should take advantage of the additional $3,000 catch-up contribution Uncle Sam allows.) Go ahead and give your retirement savings a bonus gift: Send an IRA contribution check to your brokerage account for the year 2004. There's a $3,000 limit ($3,500 if you are over the age of 50), but again, every little bit helps.

Now rerun those cocktail napkin calculations. See? Things are looking up for the second half of life.

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