Financial Makeover: Smart Retirement

Dec. 9 -- I would like to be able to retire at some point in my life. My family always had money and I "felt" I would be able to depend on that income. The money did not materalize. I feel like it is a hopeless situation to even start looking at a financial goal and I will have to depend on my "teacher retirement."

With investing for retirement, some of the biggest challenges may come when your goal is right around the corner. The sooner and more thoroughly you plan for these potential issues, the better prepared you'll be able to enjoy your golden years. The 403(b) tax sheltered annuity that Lola and a lot of teachers have, may be the best place for you to be.

It is important that you develop an appropriate asset allocation strategy. Traditionally, people believed that, as retirement approaches, they should shift most of their money out of stocks and into bonds because bonds provide principal protection and pay current income.

Today, with longer life expectancies, as an investment professional I generally recommend that people keep a good portion of their assets in stocks throughout retirement. People can draw income from stock mutual funds by establishing a Systematic Withdrawal Program.

For retirees who elect this option, as an investment professional, I will recommend an annual percentage rate for their withdrawals, such as 6 percent. If retirees' stock holdings rise in value at a higher rate than their withdrawal percentage, retirees can continue torealize principal growth, even while using their stock investments for current income.

While every stock investor is worried about the next market downturn, it is important to note that over 30 years a person could live through as many as five or six market cycles.

Stock-Heavy Portfolio

For people retiring, I don't recommend the traditional 60 percent stocks, 40 percent bonds split, I usually suggest a heavier weighting in stocks. If they're conservative and worried about risk, I recommend conservative stock funds, such as utility funds and growth and income funds.