FINANCIAL FOCUS: '80 PERCENT' CONCEPT NOT ALWAYS ANSWER

This "Financial Focus" column is prepared by Edward Jones Investments, headquartered in St. Louis. Jones includes branches throughout the nation, including Cape Girardeau and Jackson.

If you've read much about financial planning, you've probably come across the idea that you will need anywhere from 60 percent to 80 percent of your annual pre-retirement income for each and every year of your retirement. According to this thinking, you will need to adjust all your savings and investment strategies so that they will provide you with this "definitive" percentage.

Where do these figures come from? Actually, they're just a "common denominator" that has gained widespread acceptance. But the truth is that there is no one "right" number -- or even range of numbers -- for everyone. To really know what you'll need in retirement, you'll have to take into account your individual goals and your estimated expenses.

To begin with, you'll want to develop your own personal "vision." What do you see yourself doing during retirement? Will you earn income by starting your own business or by consulting? Will you purchase a second home and spend most of your time pursuing leisure activities? Will you volunteer for local civic organizations?

Your choices are almost limitless. And what you plan to do during retirement will greatly affect the savings and investment techniques you employ before you retire.

For example, you might be planning to start a consulting practice upon retiring from your present career. You know that your skills and expertise give you an excellent chance of earning a significant amount of money. Furthermore, you plan to live in your current house, which will be paid for by the time you retire. Taking these two factors together, you decide that your investments need to provide you with only a relatively small amount of your retirement income. Consequently, you feel free to take some chances with your portfolio, and you invest part of it in aggressive growth instruments, which could ultimately provide you with strong capital appreciation.

On the other hand, suppose you want to retire early and then have nothing further to do with the world of work. You also want to purchase and maintain a vacation home, in which you will live half the year. In this case, you will be counting heavily on your investments to provide you with the financial resources you require. As a result, you may need to tilt your portfolio more strongly toward investments that you can be reasonably sure will provide you with the income you need.

As you can see from these simplified scenarios, your ultimate retirement income goals should be based on your individual needs -- not on an arbitrary number. So, start thinking now about the type of lifestyle you want during retirement. You may want to consult with a qualified financial professional. A professional can help you articulate your retirement vision and create a long-term strategy that is designed to meet your individual goals, investment preferences and tolerance for risk.

The Southeast Missourian does not recommend that readers buy or sell stocks featured in this column, which is provided for informational purposes only.