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Have a plan: Start your planning by carefully considering the "L" word: longevity. "That you don't know how long you will live makes it an intriguing problem," says Dan DeKeizer, a vice-president and actuary in MetLife's Retirement Strategies Group. That makes properly managing the risk in your retirement portfolio challenging. For example, if you're in good health and intend to retire in your mid-60s, you may want to plan for a retirement lasting 30 years or longer, according to Standard & Poor's. |
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Think about the long term:
Long-term care, that is. MetLife's DeKeizer says buying long-term care insurance now can be a smart move. Saving enough to cover such care means setting aside about $200,000 for a typical American, according to MetLife. Instead, you could take care of this need through long-term care insurance, the premiums for which would cost about one-third of this amount. That could free up money for more spending in retirement, says DeKeizer. |
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Keep an eye on inflation:
It adds up. At an average inflation rate of 3%, your cost of living would double every 24 years. Your annual income will need to increase each year even during retirement to keep up with the gradual rise in the prices of everyday goods. When you estimate the effects of inflation, you may decide that after you retire you should continue to invest a portion of your assets in investments with the potential to outpace inflation, according to Standard & Poor's. |
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Get some help: Your financial adviser can help you develop an estimate of your needs and a plan to help you accumulate a retirement fund to provide the appropriate income. |
Don't |
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Jump the gun on Social Security: If you can hold off on filing for benefits until after age 62, you should do so, says DeKeizer. "The longer you wait, the higher the payout stream," he says. Annual Social Security income increases about 20% for every two years an individual postpones taking benefits, according to MetLife. Additionally, Social Security is one source of retirement income that keeps pace with inflation—a valuable feature of the program that retirees can maximize by delaying filing for Social Security benefits until they are 65 or 67. |
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Let your generosity get the best of you:
Your nest egg may seem flush right after you retire, and perhaps you'd like to show your gratitude with a very generous donation to a charity or a favorite cause. Think carefully, says DeKeizer. He says retirees would be better served by donating funds out of guaranteed income from investments, rather than from the underlying principal. Regarding donating to good causes, the smartest thing many retirees can give is their time, he adds. |
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How to Make the Most of Retirement Assets
Our playbook provides some essential rules of thumb to guide you when you're figuring out how much money you'll need to retire
By Will Andrews
As you get ready to retire, your nest egg may look hefty enough to meet your needs. But is it really? By most estimates, you'll need 60% to 80% of your final working years' income to maintain your lifestyle after retiring, according to retirement experts at Standard & Poor's. Alas, the best-laid plans of retirees can be subject to X-factors such as life span, inflation, and financial-market volatility that can eat into your retirement funds.
That's where an understanding of the risks comes in handy. Here are some tips for making the choices that will help you meet your financial needs in retirement: