Act now if setting up own retirement fund; Structure: People without company plans need to determine their goals and how they'll get there.; DOLLARS & SENSE


Gail Filerino, the owner of a Baltimore mortgage company, would like to have $20 million in her retirement portfolio when she's 60 so she can travel around the world.

But at 47 years old -- and only two months into her retirement savings plan -- Filerino is socking away $1,000 a month in a portfolio of investments so she can have a more realistic $500,000 to retire on.

"I want to be able to live well when I retire," said Filerino, who started Nationwide Mortgage Guaranteed Services two years ago and has never participated in a company 401(k) savings account.

"I don't want to have to worry about finances every five minutes," she said. "I don't have to be rich, but I'd like to maintain my quality of life."

Millions of Americans who may work on commission or work for or own a small business do not have company-sponsored plans, and must pay for retirement on their own.

It may seem tempting to put retirement savings on the back burner, but data show that if workers don't plan ahead, they could find themselves in a squeeze, said William Keating, a financial counselor who teaches finance courses at Montgomery College and the Johns Hopkins University.

"The first item is for people to really understand what happens if they don't do something," he said.

Retiring on Social Security benefits as the sole source of income isn't realistic, Keating said. The current maximum Social Security benefit for a worker who retires this year at age 65 is $1,373 a month.

To help workers better plan for retirement, the U.S. Social Security Administration began mailing out Social Security statements Friday to all workers age 25 and over, said John Trollinger, an administration spokesman.

The annual statements detail what benefits workers could expect upon retirement based on their past and current earnings, Trollinger said.

"Social Security was only designed to provide partial income replacement," he said. "Most financial planners say a person needs between 70 and 80 percent of their pre-retirement income. Social Security provides somewhat less than that."

Saving enough to meet their needs after walking away from their careers may sound like a daunting task for those self-financing their retirement, but it can be accomplished with a goal and a structured plan, said Linda F. Caplan, a certified financial planner and president of Financial Consulting Services Inc. in Towson.

"You can't say I'm going to work as hard as I can and save as much as I can, because it doesn't work," Caplan said. "What people don't understand is they could be retired for as many years as they worked. If you retire at 55, you could live until 85."

To determine a retirement goal, first ask a few questions:

How much monthly income do you want at retirement?

How much time do you have until retirement?

What's your risk attitude?

After gathering those answers, the next step is to calculate how much money must be put aside each month to reach that goal and how to invest that, Caplan said.

The most common vehicle for retirement savings is the traditional IRA, or individual retirement account, which is tax-deferred and tax-deductible under certain circumstances. The IRA is designed for employees with no company plans, or for lower-income employees. Workers can contribute up to $2,000 a year.

There is also the Roth IRA, a nondeductible, tax-deferred individual retirement account that allows tax-free withdrawals under certain conditions.

For the self-employed, there's the SEP-IRA, or a simplified employee pension individual retirement account, which permits owners of small businesses and people who are self-employed to set aside money for retirement through tax-deferred investment accounts.

While the traditional IRA allows a maximum annual contribution of $2,000, a SEP-IRA allows up to $24,000.

"An IRA is an excellent vehicle, if it's understood," Keating said. "A huge percentage of the population think an IRA is an investment. They don't understand that it's a set of rules that govern the tax treatment of dollars."

The problem with opting for a savings account, annuity or other interest-bearing retirement vehicle is that they barely keep pace with inflation, Keating said.

He recommends that people include mutual funds in their retirement investments.

Mutual funds are also a good choice for people who do not have a lot of time to accumulate money for retirement, he said.

But even those with company plans ought not have false security about their retirement savings plans, Caplan said. People in company-sponsored retirement plans typically will not have enough to reach their goal, she said.

Stanley Levin, a team leader at the Social Security Administration in Woodlawn, is in such a situation. At 65 years old, he's eligible for retirement, but says he may continue working until 2003 to "increase the productivity of our investments," he said.

While the federal government doesn't have a 401(k) plan, it does offer a similar retirement system that restricts how much an employee can invest to a certain percentage of his salary.

Levin and his wife, Isabel, didn't start planning for retirement early enough, he said.

"If people have procrastinated, the one thing that I always try to impress upon them is it's never too late to do something," Caplan said.

For Filerino, the mortgage company owner who has restructured her budget to come up with $1,000 a month to contribute to her retirement savings, that means forgoing some spending now for the sake of saving for her latter years.

"I'm starting late in life," she said. "But that's $1,000 well-spent."

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