There is never a bad time to plan for retirement and thinking in advance is the key to retiring in style.
But in today's economic climate, it can be difficult to save for retirement.
Some of the key questions that need to be answered when planning for your retirement include: How much will I need for my retirement in order to live comfortably? What are my goals? When should I start? How much can I count on from Social Security? and What costs might I run into once I've actually retired?
Two other keys include determining your risk factor and the rate of return a person needs to retire, Michael Kresh, president of M.D. Kresh Financial Services told Newsday.com.
Experts agree that investors should put away the maximum amount that they can for retirement. So how do people do that when they need all of their income to make ends meet?
Retirement planning advice that is put forward in bull markets is not the same sort of retirement planning advice that would be put forward at times when stock prices are low or moderate. Advice based on the "safe withdrawal rates" in retirement don't necessarily work well in this economy.
One thing you can do is delay when you start receiving your benefits. For retirees who have a pension plan, the guarantee amount is lower if you begin receiving payments before age 65 or if your pension includes benefits for a survivor or other beneficiary. "The people who are at most risk of losing benefits are people who retire at younger ages," Jeffrey Speicher, a spokesman for the Pension Benefit Guaranty Corporation told U.S. News & World Report.
Another piece of advice is to prioritize your retirement savings. "Don't let fear squander your opportunity to take risks when saving for retirement," Brian Kazanchy of wealth-management firm RegentAtlantic told USA Today. "Keep contributing to your retirement accounts, even if it means taking a break from contributing to [other] plans," he added.
The strategies differ for each age group, however.
Because younger investors can take more risk, and the highest total return is in equities, a diversification of 80 percent equities and 20 percent bonds should work well for investors in their 20s.
For those in their 30s and 40s, converting traditional IRAs to Roth IRAs may be advantageous because you won't have to pay taxes on that money when you are retired. Experts also recommend continuing to contribute to IRAs even when the market is down.
As you head into retirement, you should diversify more. Kresh says a 70 percent equities and 30 percent bonds ratio is sufficient. Financial planner Ellen Douglas told Newsday that even more diversification is necessary once investors reach their mid-50s. She says 25 percent each in equities, real estate investment trusts, bonds and high-cash instruments would work best for that age group.
Finally, once you've reached retirement you should continue to invest as much as you can and diversify. As Americans live longer, retirees may need to make their money last another 20 to 25 years.
The AARP offers more tips on retirement planning and www.mymoney.gov has budgeting tips and other advice to help you retire in style.
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