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By Bill Losey

Editor's Note: Beginning with this column, Bill Losey will answer questions submitted by readers about their financial future and retirement. Send your questions to moneyadvice@chronicle.com.

Question: I am a professor about six years from retirement -- that date has already been extended four years because of the recession. My growing concerns about financing retirement include the increasing cost of health care and insurance, the cost of housing if we move (which we would prefer to do), and the dependability of Social Security. Although warnings about the Social Security Trust going broke are not new, they are increasing. Our government leaders seem to gloss over the concerns. Since it will be at least half of my retirement money, what can I do to plan for Social Security's failure?

Answer: In my heart of hearts, I hope and believe the government will take the necessary steps to keep this program solvent. In reality, though, I don't think anyone has a clue as to how this will be accomplished. I see two main problems. One is a decreasing birthrate. In short, fewer babies equals fewer people working to support our ever-expanding Social Security obligations.

The second problem is that the number of people living longer is growing exponentially. According to the Society of Certified Senior Advisors, no state today has more than a fifth of its population over the age of 65. In 20 years, that will be the case in 30 states.

As we baby boomers begin reaching normal retirement age, we will strain the already tight system. In my opinion, you can do only a few things to control your situation and I warn you that you won't like some of my answers.

First, since you have a preference for relocating, try to make it to a state where the cost of housing and taxes are low. Do your homework. Try to locate a town where your cost of living will be less than your current situation.

Second, meet with a financial adviser who can run multiple retirement planning projections for you. Hire someone who has the ability to run Monte-Carlo simulations. That will show you the probability of retirement success using various scenarios; for example, with Social Security included as a source of income, and with it excluded.

Getting such advice should be a high priority, since you calculate that half of your retirement income will be from Social Security. To find a financial planner, visit the Web site of the Financial Planning Association.

Third, contact the Social Security Administration (call 1-800-772-1213, or visit its Web site). Express your concerns and see what resources it has available to help you make your decision. Order your Personal Earnings and Income Benefit Statement. It will indicate how much money that the agency expects to pay out to you, beginning at various ages.

Next, consider working longer, or at least consider working part time during your retirement. I have assisted many individuals who couldn't wait to retire, only to find out that the grass wasn't greener when they did. Many have found comfort and peace of mind with part-time earnings.

Finally, since you give yourself at least six more years to work, take full advantage of your college retirement plan. An individual can contribute $13,000 to a defined contribution plan in 2004, and employees with more than 15 years of service, and who are over age 50, may contribute up to $19,000 this year. Check for limitations with the human-resources department on campus.

Your situation is a common one. I wish you well.

Question: As a newly appointed assistant professor at a well-regarded East Coast state university, I have my first chance to accumulate pension funds at the tender age of 47. (OK, I was a practicing artist for 25 years beforehand and chose to eat instead.) Now, I'm wondering, once I feel stable enough in the next few years, whether I would be better served putting any extra money into a new pension or saving it for a down payment on a house. The costs of rental housing here are more than, or equal to, mortgage payments. What does the crystal ball have to say?

Answer: My crystal ball says you should try to do both. You need to realize that every dollar you pay for rent now doesn't provide any tax benefit to you. Conversely, every dollar in interest and taxes you pay on a mortgage is deductible. You could be saving thousands of dollars every year by becoming a homeowner.

For example, let's assume your monthly rent is $1,250 and you don't feel stable enough to invest any extra dollars in your pension. If, instead, you were able to buy a home where your mortgage payment and taxes were $1,250, you could write off roughly $15,000 a year on your tax return. By converting your nondeductible rent payment to a deductible mortgage payment, you could potentially lower your taxable income by $15,000 a year in the early years of the mortgage. Assuming you are in a 15 percent tax bracket, that could generate in excess of $2,000 a year in tax savings, which could be directed toward your pension.

With mortgage rates at 45-year lows and the cost of housing increasing, if you wait a few more years to feel stable enough, you could price yourself right out of homeownership There are many mortgage programs available to first-time home buyers. Some programs will allow you to borrow up to 100 percent of the cost of the house. Others will finance up to 97 percent of the cost. Pick up the phone and contact a local mortgage broker and begin researching mortgage programs available to first-time home buyers. The broker should be able to steer you in the right direction. Take action today.

Question: I save the maximum allowable every year in an annuity. Since I am not paying taxes on the amount placed in the annuity, does that mean that the computation for my Social Security benefit and the state retirement system benefit would be less than if I did not put any money into an annuity? What would be more beneficial for retirement?

Answer: Congratulations on being able to save the maximum allowable each year in your retirement plan. You are way ahead of the game.

I checked with the Social Security Administration and you are 100 percent correct. Your Social Security benefit is based upon the taxable income you report every year to the IRS when you file your income tax return. Consequently, making contributions to your retirement plan lowers your taxable income and thereby the ultimate benefit Social Security will pay out to you. Since I don't know what state you live in, check with your human-resource department to see how contributing affects your state retirement benefit.

According to calculations I ran, when you factor in the tax break you get on every dollar contributed to your retirement plan plus the tax-deferred interest and gains you receive until you begin to withdraw funds, in my opinion, it is more beneficial to continue contributing the maximum to your plan.

Realize, we are in the midst of a retirement crisis in America with regard to Social Security. The government is increasing the age at which retirement benefits can begin. Federal officials are looking for ways to limit and/or reduce the ultimate payout we will each receive. There are fewer and fewer workers to support our retirees. Take matters in your own hands. Keep maxing out your contributions. Look at Social Security as the gravy.

Question: There are so many online as well as hard-copy tools for estimating what one really needs to live comfortably in retirement. What are the best ones that most accurately and realistically help?

Answer: There are two I really like. One is the T. Rowe Price Retirement Income Calculator. Another Web site I enjoy is here.

Both allow you to run multiple scenarios and illustrate your probability of success. If those fail you, seem complicated, or you just don't understand the output, consider hiring a financial planner who can help develop sound strategies and solutions for you.