Planning Ahead

Retirement wasn’t on Steven Taylor’s radar until this past July, when the State of Maryland Office of Corrections changed its retirement policy. Employees are no longer required to work 30 years before retiring. Now, 20 years is a sufficient term of service. Taylor, a dietary correctional officer, has roughly 18 months before he hits the 20-year mark. So he needs to plan for his nonworking years in a hurry.

The trouble is he’s far from being prepared financially. Though he makes $48,000 a year, he doesn’t have any savings. He says he’s leery about banks after he had to spend a month trying to get access to his money during the savings and loan crisis of the late ,80s. He has about $500 in a secret stash at home, and he has been participating in his retirement plan at work for only a few years.

At age 49, Taylor is desperately trying to add to the $3,500 he has in his employer-sponsored plan. In the last 18 months, he switched from having his money primarily in a bond mutual fund to equity mutual funds, where he hopes to earn better returns. Taylor also increased his payroll deduction and is working as much overtime as he can get.

One thing working in Taylor’s favor is his pension, through which he’ll receive a guaranteed $1,300 a month for life. His monthly expenses are about $1,800, so he plans to make up the difference by working for himself. “I’ll find other ways, like real estate investments or selling real estate, to add to my pension income so that I can afford a house. Staying at my current job is not an option,” he says.

Owning a house is a priority for the Baltimore resident. He has explored the market but was discouraged when a real estate agent was none too impressed with his credit report. His credit score, 573 out of 850, reflects in part a history of delinquent payments. The low score makes him less promising as a potential home buyer and makes becoming one more expensive; the lower your credit score, the more likely you are to pay a higher interest rate. “This is what happens [when you’re] a procrastinator and disorganized,” says Taylor.

To get that house, Taylor will have to do a better job of managing his money. He has about $600 in discretionary monthly income. But Taylor hasn’t made that money work for him. What’s gotten in the way of saving? “I like to travel, take weekend getaways. That adds up,” he says. So do the four nights a week at his favorite restaurants.

Taylor is unsure about his future. “I don’t know how to get where I want to go after I retire, what steps to take. The worst thing would be to take early retirement and not follow through, to have to go back to working on somebody’s clock.” He believes, though, that once he comes up with a retirement road map, he’ll have the discipline and means to follow the