Five (Fairly) Easy Pieces of Advice for Retirement Planning

Fact: Today's fifty-year-olds can expect to spend more than twenty years -- or about a third of their adult lives -- in retirement. Here are five prescriptions for ensuring that you will spend that time in reasonable comfort.

1. Save before you spend. Why do many people end up with too little retirement income? The answer is simple and has little to do with return on investment. Usually, those whose incomes fall short when retirement time rolls around just didn't save enough.

Of course, most of us spend first and plan to put away whatever's left. There's only one problem with this strategy: Just as work expands to fill the time available, our expenses increase to match the money in our pockets.

A better idea: Save before you spend. You've heard it before, but it bears repeating: Pay yourself first.

You can set up a savings program painlessly through a payroll savings plan -- you won't miss it if you never see it in your paycheck -- or by asking your bank to automatically transfer a specified sum to your investment account each month. Or, you can train yourself to write a check to your own account on a set date. The best time to begin is immediately, but it might be easier to start saving when you receive a raise.

Another idea: If you regularly receive an annual bonus, sock that money away, too.

2. Let Uncle Sam help you save for retirement. To build up your retirement savings faster, make full use of so-called tax-favored plans, such as 401(k)s. The amount you set aside in these plans accumulates tax-deferred until it is withdrawn. And that fact can mean thousands of dollars in extra savings.

3. Familiarize yourself with your employer's retirement plans. Make sure you factor in your employer's contributions to pension plans, 401(k)s, and any other plans in place. And carefully evaluate the many investment choices you have within these plans. Finally, coordinate the investment strategies of your employer-sponsored plan with the strategies you are pursuing through any other options. You need to balance your risks with a well-thought-out allocation of your assets.

4. Reassess your financial profile. You should be very clear about both your circumstances and your attitude when it comes time to invest for retirement.

Ask yourself these key questions: Will I want to take on another job after I retire from my present one, thereby reducing my reliance on investment income? What about my tax bracket? Will I move in to a lower bracket immediately after retirement or sometime later?

Do I want to use my leisure time managing my investments or pursuing other interests? Am I fairly knowledgeable about investments? If not, do I want to learn? Am I willing -- and can I afford -- to take risks? Or is safety of principal my primary concern?

Also, am I comfortable with investments that tie up my funds for a long time? Or do I prefer greater liquidity -- especially during a time when I may make big changes in my habits and plans?

Answering critical questions like these will put you on the right path toward developing an investment plan that is right for you.

5. Finally, don't wait until next year to begin. Every year you delay means substantially less money in your retirement fund.

Keep in mind that money is only part of the retirement picture. Even more than with other areas of financial planning, retirement planning is life planning.

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Ruth Hlavacek is a veteran writer and editor whose work has appeared in a variety of national publications.