Next year the oldest of America's 77 million baby boomers will become eligible for Social Security benefits. That means the biggest generation in the country's history is starting a countdown to retirement. If you are among those preparing for this highly-anticipated phase of life take these five steps now to help make sure your financial house is in order:

1. Create a plan to eliminate or restructure debt. Excessive financial obligations can put a damper on your retirement dreams. Your peak earning years offer an opportunity to take stock of outstanding debt and create a plan for managing it once you are no longer working.

If you find that it's necessary to carry debt into retirement, investigate your options now for debt consolidation. A home equity loan or line of credit can provide a solution for debt consolidation that may offer tax advantages as well. You may want to discuss this with your financial and legal advisors, however, since your house is at stake if you're unable to make the required, timely payments on these loans.

2. Take advantage of catch-up contributions. Uncle Sam provided an extra incentive for pre-retirees to stash some extra cash by raising retirement plan contribution limits in 2001. The increased limits were set to expire in 2010 but last year's Pension Protection Act made them permanent.

Savers age 50 and older who meet eligibility requirements can contribute $5,000 to their IRA in 2007 and $6,000 in 2008. After that, contribution limits will be adjusted for inflation in $500 increments in subsequent years. Also, individuals who are age 50 or older and are participating in company-sponsored retirement plans like 401(k)s, 403(b)s and 457 plans can contribute $20,500 this year.

3. Protect what you've accumulated. You've spent your working years accumulating the money you'll need to live in your remaining years. However, you could risk losing your nest egg if you are uninsured or under insured.

Personal liability or umbrella insurance policies protect you when the lawsuit coverage in other policies, such as auto or homeowners insurance, is exhausted. The cost for $1 million worth of protection is relatively inexpensive and may be worth consideration for those people with a high net worth.

If you're counting on your income for the next few years to help fund retirement, disability income insurance may be worth strong consideration. If your employer provides such protection, check to see if it's enough for your needs. Group coverage is often capped at six months and may provide limited benefits.

While your life insurance needs may change once you no longer work or have dependents to support, cash value permanent life insurance may still offer protection and be a conservative savings tool for your retirement years.

An overall insurance review is an important step in your final approach to retirement. A professional can help you understand your options and help ensure that you've protected what matters most in your life.

4. Tune up your estate plan. According to a 2004 study conducted by LIMRA International, only half of the adults in the United States have a will, trust or power of attorney arrangement as part of their estate plan. If you've procrastinated on the estate planning process, now is the time to consult a knowledgeable estate planning attorney to help protect your legacy.

When thinking about estate planning most people only think about taxes. But proper planning can do much more than help ease your tax burden. It can help direct your inheritance to the people and causes you care about and address your financial obligations.

At a minimum you'll likely want to document directives for your financial and health care decisions through a power of attorney. While everyone should have a will remember that assets passing under a will are still subject to the probate process. Those people with significant assets may want to consider more complex estate planning vehicles like trusts, which have potential to both avoid probate and offer estate tax benefits as well.

Now is also a critical time to make sure your beneficiary designations are up to date on all individual and employer retirement plans. If your marital status has changed these updates are especially important.

5. Call on professionals for the help you need. Your financial security in retirement is a serious matter. That's why it's important to have skilled professionals on your team as the clock ticks down to the day when work is optional. If you haven't already done so, it's a good time to seek guidance from a financial advisor. He or she can help make sure your plan is on track with your retirement goals and dreams and also make suggestions for adjustments as your situation and the economy change.

Bill Honohan is a financial advisor with Ameriprise Financial in Hanford. Bill welcomes comments and questions and can be reached in his office at 584-1511. Please write to him at 113 Court St., Suite 102, Hanford, CA 93230 or william.p.honohan @ampf.com.

(March 13, 2007)