10 secrets to a financially secure retirement
— -- 5 ways to boost your income
1. Don't retire impulsively.
Each year, the Employee Benefit Research Institute surveys Americans, and every year without fail they tell the pollsters that they plan to retire at age 65. Regardless of what they say, though, retirees usually bail at age 62.
"There's a disconnect between what people say they will do and what they end up doing," observes Alicia Munnell, director of Boston College's Center for Retirement Research. Munnell used to find this reality puzzling, but she thinks she's found an intriguing reason to explain the behavior.
"The decision to retire is sometimes made for superficial reasons," Munnell says.
She's heard many stories of older workers quitting suddenly because they had been stuck on airplanes too long during business trips. She heard of a woman recuperating from a sprained ankle who decided she really liked to watch daytime television, so she retired. Some quit because they were peeved at younger bosses.
Leaving in a huff without developing a solid exit strategy, though, can be financially foolhardy.
2. Invest in stocks for the long term
Plenty of investors turn timid as they age, so it's no surprise that many retirees consider stocks off-limits. What they fail to realize is that an ultra-conservative portfolio stuffed with bonds and certificates of deposit can't keep up with inflation. It may be hard to imagine, given the current bloodbath on Wall Street, but over the long run, returns from stocks and stock mutual funds tend to surpass the returns on other investments.
Adding stocks to a retirement portfolio can boost your returns without exposing you to reckless risk. "If you have a portfolio with 20% to 30% stocks, your volatility is about the same or less than if you bought long-term bonds," says Larry Swedroe, an investment adviser in St. Louis and the author of The Only Guide to Alternative Investments You'll Ever Need: The Way Smart Money Diversifies Risk.
3. Seek pension help.
Those lucky enough to retire with a pension must often decide whether to take a lump sum or a lifetime of monthly checks. Grabbing that huge chunk of change all at once is exceedingly tempting, but retiring workers should consider consulting a pension actuary before making such a momentous decision.
Related Stories
ABC News Live