If you follow the news regarding the level of savings in America, you probably know that most people don't have adequate savings for a traditional retirement.  (My October 2008 newsletter covered this subject in detail.)  But this news shouldn't be cause for despair--most people have more than they think.  You'll just need to be resourceful, make every dollar count, and take advantage of all your resources--financial and non-financial.
 
When you're determining if you'll have enough money to last through your retirement years, a good place to start is to take inventory of all the financial resources you have that might produce income or provide protection against risks in your retirement years.  It's also important to look at your expenses to see how they might change after you retire.  Now is a good time for this task, as you gather your records for preparing your income tax returns.
 
There are two ways you can take inventory. The first is to use an existing financial management software system. There are several good ones out there, and if you consider yourself tech-savvy, this is a good way to go.  If you prefer something simpler, then you might just use spreadsheets or forms on paper.  If you like this paper approach, I've posted on my website easy-to-use retirement planning worksheets that I use for my workshops; they contain a sheet that will help you document your current living expenses and how they might change during your retirement years. 
 
Getting Started
 
When taking inventory, it's important to make the distinction between net worth and income-producing assets.  Many financial advisors will tell you to calculate the value of your total net worth.  While that's a good exercise, it's best use is for after you die and your heirs are cashing out all your possessions.  Not exactly what you had in mind? 
 
A more useful task is to add up the financial resources you have that will produce income in your retirement years.  For this, you'll include obvious items such as the value of all your 401(k) balances, IRAs, and savings and investment accounts.  Be sure to include the assets of your spouse or partner, too, if applicable.  If you work for a nonprofit or the government, you'll need to include the balances in any 403(b) and 457 savings plans you've contributed to.  

If you worked for an employer with a defined benefit pension plan, find out the amount of your lifetime monthly income.  You can do this by contacting your employer's HR department or the plan administrator; you might also be able to check online.  While you're at it, determine if there will be adjustments for retirement before the normal retirement age (typically age 65) or if you elect to continue income to a spouse or partner after your death. 
 
If you have a vested benefit from prior employment at a company or organization other than a government entity and you don't know how to find information about your pension, contact the Pension Benefit Guaranty Corporation (PBGC) through their website (www.pbgc.gov).  Your prior employer is required to report your pension to the PBGC.
 
One asset that people often overlook is accumulated vacation or sick time.  If this will be paid out when you retire, this can be a hidden source of savings for you.
 
Now that I've told you what you should include, here's what not to include: any items that might be included in your total net worth but that don't produce income.  Such items can include your house, automobiles, antiques, jewelry and collectibles, unless you plan to sell them after you retire and convert them to assets that can generate income.  If this is the case, be sure to reduce any sales proceeds by an estimate of applicable taxes and selling costs. 
 
Resources That Protect
 
When you're creating your list of assets, you'll want to be sure to include all the insurance policies you have that can provide protection in your retirement years, such as life insurance, medical insurance, disability insurance and long-term care insurance.  While you're at it, now's a good time to review whether these policies still meet your goals.  For example:
 

• If your children are grown and independent, you may not need as much life insurance, and you might be able to make better use of the premium dollars in some other way.

• If you're close to full retirement, you may not need disability insurance that replaces lost income.

• If you have medical insurance, you might not need specialized insurance such as cancer insurance or insurance that covers wages lost while you're sick.

On the other hand, you also need to consider whether you have needs that aren't currently protected.  For instance, a common risk for older Americans is long-term care.  My September 2009 newsletter goes into much more detail on this topic. 

A relatively new benefit for some people is a Health Savings Account (HSA), which can be used to pay for future health expenses.  If you have one of these, add it in.

Finally, you may have hidden resources in existing insurance policies that you've had for awhile.  If you have whole life insurance, for instance, you may have cash values that can be invested or converted to a life annuity.  Take a close look at your retirement needs, and ask your insurance agent or the insurance company about all your options for your policies.
 
Is Your House a Financial Resource?
 
The equity you have in your home deserves special attention, particularly because for many baby boomers, it's their largest asset, even larger than their 401(k) balances.  Your home can be used to produce income, either through a reverse mortgage or by renting out a room or two.  Or you can sell it, downsize and invest the remaining net proceeds to provide monthly income.
 
Home equity can also be used to protect against the risk of long-term care expenses.  How?  By holding off on using your equity to produce income until you really need it (see my September 2009 newsletter for more on this subject). 
 
Even if you don't use your home equity as described above, your current home can simply be a good place to live, while containing your housing costs.  In any case, determining the best use of your home equity will be an important decision that deserves careful thought.
 
Your Most Important Asset
 
Since most people have inadequate financial resources for a traditional retirement, they'll need to work some during their retirement years.  In this case, your income-producing skills may be your most important asset. 
 
You'll need to think carefully about what employable skills you have.  You may have technical skills and knowledge related to your current career that are transferable to other careers.  For example, I know a few people who are currently buyers for bookstores and book distributors.  With the publishing industry in decline, employment opportunities may be limited in that industry, but their purchasing and inventory skills can be used in other procurement situations.  While you're taking inventory, don't overlook personal skills, such as friendliness, promptness, reliability, writing or speaking skills, and so on.  These are all qualities that could serve you well in another job.
 
What contacts have you made over your lifetime?  You may be able to branch out to a field related to your current profession that takes advantage of your network of contacts.  For instance, someone with a marketing background might find that a public relations contact might need some part-time writing help.
 
It's important to realize that unfortunately, your income-producing assets may fall in the "use it or lose it" category.  Your skills and contacts can become outdated or fade in usefulness, and it can be difficult to jump back into the workplace after a long absence.  This is one good reason among many to phase down instead of retiring completely.  By working part time, you can keep your skills and contacts current yet still have more time to pursue other interests.
 
Your Human Capital Inventory Is Also Important!
 
Another critical part of taking inventory is looking at your "human capital."  While it's not financial in nature, it most certainly affects just how comfortable and happy your rest-of-life will be.  Here are some questions to consider:
 

• How many friends or relatives can you confide in and discuss important life decisions with?

• How many friends or relatives live nearby and would come to your aid in an emergency?

• Would any of these friends or relatives be able to take care of you if you needed long-term care?

• Do you have friends or relatives with whom you can share resources, such as a home, car, appliances, tools and so on?

• With how many friends and relatives do you participate in regular activities that give you enjoyment and meaning in life?  Are you "diversified," meaning that you have several good friends in addition to your spouse or partner?

• What social institutions are nearby that can help you and provide social contacts?  Include such associations as churches, social organizations, clubs and the like.

• What state and local government organizations or nonprofits are available to provide potentially necessary services?

While it may be human nature to worry about the future, we'll have to move beyond that to make a difference in our lives.  The best you can do is realistically assess all of your financial resources, which will reveal how critical it is to take advantage of your income-producing skills and your human capital.  Please don't overlook these important non-financial resources; if your financial resources are insufficient to provide the resources you need to retire, you may need to put your "human capital" to good use.  If you adopt a creative and resourceful attitude, you'll probably find you have a lot more assets than you think!