Smart Moves for Retirement
With health care costs continuing to increase, the future of Social Security unclear and pension plans available to fewer and fewer workers, America's retirement readiness is a major concern for both individuals and the nation as a whole.
Since June 2004, Fidelity Investments has completed about 200,000 income plans for retirees and pre-retirees who faced the daunting task of gauging their preparedness for retirement. Fidelity learned that some simple, yet often ignored, investment strategies can help ensure a more comfortable retirement. Here are some basic strategies to consider.
* Make it work while you're still working. Investors in their peak earning years should take full advantage of employer-sponsored retirement plans, individual retirement accounts and deferred annuities.
Asset allocation should be age appropriate and investors should avoid two common retirement savings mistakes: being overly cautious or taking excessive risks when deciding how much of their assets to invest in cash, stocks or bonds. Remember, though, that this does not ensure a profit or protect against a loss.
Individuals also may want to take into account simple tradeoffs that can reduce expenses and increase savings, such as holding on to the family car a few extra years once it has been paid off.
* Make it last as long as you do. Once you reach retirement, stretching retirement savings to make it last is very important. Some investors are planning to work in retirement while others are postponing retirement to take advantage of added income and continued health care benefits.
Pre-retirees may want to consider putting their salaries into income annuities, which some call "self-made pensions" because they provide guaranteed lifetime income.
Finally, given that Americans are living longer, and that market returns are unpredictable, smaller withdrawals in the early years of retirement could lead to greater long-term financial security.
* Make it count to live the lifestyle you want. Typically, investors who are able to achieve the retirement lifestyle they want have created a detailed, realistic budget for retirement living expenses. Investors should plan for rising health care costs and other financial contingencies.
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