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Make a plan for prosperous retirement

The Savings Game

For many Americans, the difference between a secure retirement and an uncertain one comes down to how well they plan.

Here are some major factors that will affect your well-being in retirement:

How much you will spend

The first consideration of retirement planning is estimating what your expenses will be in retirement. For some, they will be approximately the same as pre-retirement; for others, they will be considerably different. Some expenses, such as health-care costs, can be hard to predict and hard to control. Others, such as housing or lifestyle spending, are more within your power to trim.

You have to decide what expenses are most important to you and determine if your assets and expected income will allow you to meet the standard of living you want in retirement. If your expected income is insufficient, you may have to postpone retirement or save more before retiring.

Expected income

Your second step is to determine your expected income from your employer pension plan, Social Security, individual retirement accounts, non-retirement savings and investments and annuities. You also have to determine what age you will retire, assuming you have some flexibility.

If you haven’t determined what your expected income is from Social Security, make that determination well before you retire. You have to decide whether you intend to initiate payments at full retirement age, or perhaps take it early at age 62 or wait until 70. Social Security decisions are very important, and the wrong decisions can cost you hundreds of thousands of dollars.

Don’t depend on SSA representatives for advice. You can, however, use these representatives to determine what your income, including spousal options, would be at 62, full retirement age or at 70.

It’s not a bad idea to consult an experienced financial adviser to help you select the optimal choices for you. I recommend you read “Social Security: The Inside Story” by Andy Landis (www.andylandis.biz) and “Get What’s Yours: The Revised Secrets to Maxing Out Your Social Security” by Laurence Kotlikoff, Philip Moeller and Paul Solman.

Asset allocation

When you enter retirement, you will likely change your asset allocation to meet changing objectives. For example, you may have made significant investments in mutual funds, exchange-traded funds or individual stocks with the emphasis on growth.

In retirement, you might need funds or ETFs more oriented toward income. You should determine whether your investment objectives are significantly different and make different choices regarding your asset allocation.

Re-balance at least once a year to maintain the proportion of stocks to bonds you determine is right for you both pre-retirement and in retirement.

Even in retirement, it is important to maintain a significant allocation in common stocks to provide you with inflation protection. I have been retired for 20 years, and I still maintain about 50 percent of my investments in some form of equities.

Regarding bonds, you cannot afford to stick with the typical conservative alternatives, such as money-market instruments and short-term certificates of deposit. You need to invest in longer-term investments, such as intermediate-term high-grade corporate bonds.

Annuity options

Many retirees are justifiably concerned that they may outlive their assets. One option to consider for some of your assets is a single-premium immediate annuity for some of your assets. This option will provide you — and your spouse if you wish — a guaranteed lifetime income. You can select an inflation-protection option.

However, if you buy an annuity you should only use some of your assets for this option, because you sacrifice liquidity for the income protection.


Maintain investments with taxable interest and capital gains in your tax-advantaged retirement accounts. Investments in equity index funds can be maintained outside retirement accounts. This approach minimizes your taxes both pre-retirement and in retirement.

Elliot Raphaelson welcomes your questions and comments at raphelliot@gmail.com.

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