How to Strengthen Your Retirement End Game (U.S. News & World Report)

We spend much of our career saving and investing for retirement. And the challenges don't end on the day we retire. We must then manage our nest eggs to make sure our retirement savings lasts for the rest of our lives. Here are some ways to improve your retirement end game.

Plan how you will draw down your savings. Develop a plan to draw down your retirement savings at an annual rate, such as 4 percent of the initial balance each year, with adjustments for inflation. "You can withdraw between 4 and 6 percent of your portfolio each year and still protect the principal," says Stephen Overstreet, a certified financial planner in Winter Springs, Fla. The Congressional Research Service estimates that a 4 percent annual withdrawal rate for an investment portfolio with 35 percent in U.S. stocks and 65 percent in corporate bonds would be 89 percent likely to last 35 years or more. You can further prevent yourself from outliving you savings by withdrawing less in years when your investments perform poorly. "When there is a recession, clients should start spending less," says Overstreet.

[See 10 Essential Sources of Retirement Income.]

Retain an emergency fund. Keep an emergency fund of immediately available cash so that an unexpected expense doesn't disrupt your retirement draw down strategy. "You always need to have an emergency fund in another account that is not part of the investment portfolio, but in a bank or mutual fund," says Overstreet. "If you are heavily dependent on a portfolio, you're going to need two or three years worth of income sitting in some very safe place."

Minimize taxes. If the bulk of your retirement savings is in tax deferred retirement accounts including 401(k)s and IRAs, your timing of withdrawals could impact how much you pay in taxes. "If you take too much in one year your tax bracket could go up because you have a big chuck of money boosting your income," says Overstreet. "I believe in trying to stretch things out so you don't have too much income in any one particular year." Withdrawals from traditional retirement accounts generally become required after age 70½. Those who fail to withdraw the correct amount must pay a 50 percent tax penalty on the amount that should have been withdrawn.

Maximize Social Security. The monthly payment you are eligible for from the Social Security Administration increases for each month you delay claiming between ages 62 and 70. "If you retire later you will have more money coming in from Social Security," says Gerald Cannizzaro, a certified financial planner for Retirement Planning Services in Oakton, Va. "If you don't take your Social Security at 62, you make about 8 percent more per year for every year you don't take it." There is no additional benefit for delaying claiming beyond age 70.

[See 8 New Retirement Rules.]

Pay off your mortgage. You will be able to get by on a much smaller income in retirement if you can eliminate your mortgage. "When you retire and have no mortgage to pay it greatly improves your retirement income," says Cannizzaro. Consider a mortgage payment of $2,000 per month. "Without that payment going out that's $24,000 a year less you need to spend," says Cannizzaro.

Sign up for Medicare on time. You can sign up for Medicare beginning three months before the month you turn 65. Sign up right away to avoid a premium hike for late starters. If you don't sign up for Medicare Part B during the seven-month window around your 65th birthday, your premiums may increase by 10 percent for each 12-month period that you delay enrollment. Those who are still working and covered by a group health plan at work must sign up within eight months of leaving the insurance plan to avoid the premium increase.

Minimize fees. Pay attention to the costs and fees you are paying to invest and take steps to minimize them whenever possible. "It's very common for retail investors who are managing their own money to have multiple layers of underlying expenses that they don't even know about," says Bryan Hancock, a certified financial planner for Timberchase Financial in Birmingham, Ala. "The average expense ratio is about 1.5 percent, but there are very low-cost options that can do the same thing for a tenth of that cost, such as low-cost ETFs." Hancock recommends shopping around for expense ratios of less than 1 percent on your investments.

Combat inflation. Most people have only one source of inflation-protected retirement income: Social Security. Social Security payments increase each year to keep up with inflation as measured by the Consumer Price Index. Consider adding some additional inflation-fighting investments to your portfolio, such as Treasury Inflation-Protected Securities (TIPS), or some exposure to commodities, real estate, or the stock market.

[See 10 Reasons to Delay Retirement.]

Consider part-time or seasonal employment. A part-time job, even if you only make a few thousand dollars per year, allows you to spend your savings more slowly. You can also use part-time income to pay for gifts and trips and other non-necessities that you don't want to use your nest egg to finance. Spending less in the early years of your retirement allows you to preserve assets for the latter part of your retirement when continued employment may no longer be an option.

Twitter: @aiming2retire

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7 Retirement Planning Mistakes to Avoid (U.S. News & World Report)

Deciding to make a plan for retirement is a great first step. But there are no guarantees that your saving and investment strategy will lead to a secure retirement. Once you start your plan, make sure you take care to avoid these seven retirement mistakes.

[See 10 Places to Retire on Social Security Alone.]

Readjusting to new numbers too quickly. Many people recalibrate their retirement account withdrawals based on recent market events. For example, let's say you have $1 million saved for retirement and, adhering to the 4 percent rule, you withdraw $40,000 in the first year and a bit more the next to account for inflation. But let's say that the market has performed well the first five years of retirement and your account balance grows to $1.5 million after withdrawals. While you could begin taking out $60,000 annually and still adhere to the 4 percent rule, it might be wise to continue to withdraw closer to $40,000 and save the excess for years when your investments don't perform as well.

Not planning at all. This point is pretty obvious, but most Americans don't have enough saved to finance even a few years of retirement. Until statistics show that everyone has a retirement plan, this point needs to be drilled into everybody's head.

Trying to come up with a retirement number without facts. Too many people are simply guessing how much they spend each month. You don't need to know where every single penny is going, but you should at least have a good idea of how much money you need by having a budget. Knowing how much you spend is key to figuring out how much you need to save for retirement.

[See 10 Things You Should Know About Your IRA.]

Not getting a second opinion. The worst case retirement scenario is running out of money too soon and having to depend on your children or significantly reduce your standard of living. With stakes this high, ask a second person to take a look at your retirement plan just in case. Even if you are absolutely confident in your retirement plan, a financial professional is trained to spot potential problems before they happen. If you don't trust financial advisers, then perhaps even a trusted friend or family member could help.

Comparing yourself to others and thinking that's good enough. Many people think they will be okay in retirement because they are saving 10 percent of their paycheck for retirement and that's what everybody else is doing. But, depending on how much you spend, 10 percent of your salary may not be enough to maintain your current lifestyle. Our national retirement preparedness is not as bad as the media sometimes makes it seem because Americans are incredibly good at making do. That being said, many Americans don't have enough saved for a stress-free retirement. Saving more than the typical American does not mean that you are saving enough to support yourself without working.

[See Companies with the Most Older Workers.]

Believing that retirement planning is only about financial numbers. While the financials are extremely important, your retirement plan should include non-financial planning too. Where do you plan to live? Will you downsize your house? How are you going to spend your time each day? You need to develop a plan to fill all the time when you used to be working.

Forgetting to figure out how you will turn your nest egg into an income stream. Turning a nest egg into steady income streams isn't trivial. You need to make sure that you have a plan in place to draw down your retirement savings without spending it too quickly or unnecessarily. You don't want to waste the money that you've worked so hard to save.

David Ning runs MoneyNing, a personal finance site aimed at helping others change their habits for a better financial future. He suggests that everyone to sign up for an online savings account to get more out of our hard earned money.

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Can You Save Too Much for Retirement? (U.S. News & World Report)

There are many rules of thumb for retirement investing. Some people say that if you save 10 percent of your income, you'll be fine. Other people recommend maxing out your retirement plan at work or maxing out your IRAs. Some investment advisers recommend a combination of retirement accounts and additional investments. Rarely do you hear a retirement planner say you are saving too much for retirement, but this is becoming a popular sentiment in some circles.

[See 50 Best Funds for the Everyday Investor.]

Can you save too much for retirement? According to some financial analysts, the answer is yes. But before you take that as a license to stop saving, you should look at both sides of the story. Then decide how best to allocate your income among your normal living expenses and investments.

How do you know if you are saving too much for retirement? The first question you have to answer is how much money you will need for retirement. Unfortunately, it is difficult, if not impossible, to know the exact amount of money you will need. There are too many variables to make an accurate assessment, especially if your retirement is decades away. For example, you need to account for investment returns, inflation, rising health care costs, increased longevity, changing financial goals, and fluctuating income during your working years.

Sure, you can plug numbers into a retirement calculator and get a ballpark estimate of your retirement needs. But you have to remember that a retirement calculator is only as good as the information you feed it. So unless you have a crystal ball, you will be raising as many questions as you answer.

[See the top-rated Vanguard, Fidelity, and T. Rowe Price funds from U.S. News.]

You are saving too much for retirement if your current rate of saving causes personal, emotional, or financial hardship. If you are sacrificing your health or quality of life to save for retirement, then you need to scale back. Otherwise, you probably aren't saving too much for retirement.

Contribute aggressively while you can. You can't control most of the factors that affect your retirement plans. But you can control how much you contribute, and contributing aggressively while you can gives you more options later. My personal goal is to contribute as much as I can while I am able, and if I have too much money when I near retirement age, then I will have options such as retiring at a younger age, having more money to spend in retirement, or having more money to give to charity or my family. All of those options are more appealing to me than not saving enough and having to scale back.

[See 6 Numbers Every Investor Should Follow.]

It's all about balance. Retirement planning is important, but I think most retirement planners who caution against investing too much are really trying to say you need balance. You shouldn't sacrifice a decent quality of life just to max out your 401(k). It's OK to take a vacation, buy a big screen TV, and otherwise enjoy yourself. But don't forget or ignore retirement planning. That would be both irresponsible and dangerous.

Ryan Guina is a U.S. military veteran, writer, and professional in the corporate world. He blogs at Cash Money Life and The Military Wallet.

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This Government Meddling Could Save Your Retirement (The Motley Fool)

Nothing gets certain Fools exercised like the phrase "new government restrictions." So often, we hear that the busybodies in Washington or our state capitals are plotting some new set of limits and we get worried: Here comes more paperwork, more taxes, more annoyance, and less freedom to be left alone and live our lives in peace. And often, these worries are justified.

But I recently heard about a new set of freedom-limiting proposals that's making its way through Congress, and I cheered. Why? Because these new rules are targeting a privilege that has turned out to be a problem for many: 401(k) loans.

Not a ban, just an adjustment
First, let's get this out of the way: The bill introduced last week by Sen. Herb Kohl (D-WI) and Sen. Mike Enzi (R-WY) isn't going to do away with 401(k) loans. While these loans can be problematic and expensive (more on that in a minute), for many they're an important rainy-day resource. I think everybody recognizes that.

What the bill does do is limit some of the more egregious features, while making life a little easier for those who do take loans:

Limit 3 per customer. The number of people with three or more 401(k) loans outstanding is pretty small -- Fidelity says that only 0.8% of its 401(k) participants fall into this category -- but common sense suggests that those with lots of loans probably haven't been using their 401(k) as a last-ditch emergency fund. Those folks may need to tighten their belts: Under the bill, three loans at a time would be the maximum.No more 401(k) debit cards. Yep, the worst financial idea ever may soon be gone. In keeping with the idea that a 401(k) loan should be an emergency fund and not a piggy bank, tools like this that encourage frequent and easy access will no longer be allowed.More time to repay if you're laid off. Under current law, if you're laid off while you have a loan outstanding, you have a mere 60 days to repay it before it's considered an early withdrawal, complete with tax penalties. Under the new rules, you'd have until the tax filing deadline for that tax year to repay the loan by contributing to an IRA, reducing your tax liability. This change is long overdue, I say.Eliminate contribution restrictions after hardship. Under current rules, folks who take a hardship withdrawal can't contribute to their 401(k) again for six months. That prohibition would go away under the proposed new rules. Again, a good thing.

The idea, in other words, is to preserve the ability to tap one's 401(k) in a pinch while cleaning up some of the potential for abuse and making life a bit easier for borrowers. And while there's no question that the right to borrow from your 401(k) is a good one to have, I also don't think it's in question that some folks have gotten carried away with the loan privilege.

After all, a 401(k) loan can be awfully expensive.

An expensive tool of last resort
Most 401(k) plans allow participants to take loans, and in a crisis such a loan is often the least bad option. Fidelity Investments, one of the largest 401(k) providers, says that 22.1% of active participants in the plans they administer had at least one loan outstanding last quarter. These aren't trivial loans, either -- the average loan amount was almost $9,000, and many participants have multiple loans.

That's a lot of money to be taking out of the market. Think of it this way: For every $1,000 you had out of the market over the last two years, you would have missed more than $500 worth of growth in the S&P 500. And it gets worse if you have investments in your plan that outperformed the broader market.

In other words, the cost of a 401(k) loan can be very high, and it's mostly not about the interest you may be paying. In the long run, the lost returns from diverting money away from 401(k) investments are huge.

The upshot
I think these rule changes are long overdue. For most of us, this bill will be no big deal: Our right to take a 401(k) loan in an emergency isn't going anywhere. For most of those with outstanding loans, your life could get a bit easier if you're laid off.

But for those using their 401(k) as a sort of easy credit line, it might soon be time for them to tighten up their financial acts.

Get the government on the side of your portfolio. Check out this free report from Motley Fool analysts: "Too Small to Fail: Two Small Caps the Government Won't Let Go Broke."

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How to Maintain Your Lifestyle in Retirement (U.S. News & World Report)

Life expectancy in the U.S. has doubled in the last 200 years, and now the average 65-year-old will live to be 84. And that's just the average. If you're a married couple in your 60s there is a 50 percent chance that one of you will live to age 95! Potentially, that's 30 years in retirement if you stop working at 65. With our longer life spans, financial planning for retirement has never been more important if we want to maintain our lifestyle over the long term.

Financial planning should always be considered a verb not a noun. This simply means that planning is an evolving process because life is fluid and ever changing. There are a multitude of changes and modifications, such as shifts in financial markets and changes to tax rates or government programs, that take place over time that will affect the outcome of your retirement and financial plan. Analyzing how these changes impact your retirement income and cash flow over a 30-year retirement is no small task.

[See 6 Numbers Every Investor Should Follow.]

There are many factors to be considered when planning for retirement. One of the biggest concerns most people have is what to do when their salary stops and they must rely on income from "other" sources.

Here are a couple of questions to consider:

Did you retire too soon? Currently only 16 percent of American men work past their 65th birthday. In the planning process, we have found that working just two to three more years has a profound impact on a successful retirement and cash flow requirements. Many are also considering part-time work or being "semi-retired" to augment income needs--in effect, easing into retirement.

[See the top-rated Vanguard funds from U.S. News.]

How much income are you generating? Where is your money going and will it last? Put together an expense budget for "survival needs" and "lifestyle" expenses.

Survival needs are non-negotiable expenses, (food, clothing, shelter, health care) and they should be secured with income-producing assets like pensions, annuities, social security, rental income, and bond income that are independent from stock market declines. When the market is down, you don't want to negotiate your survival needs.

[See 5 Ominous Signs for Stock Investors.]

Lifestyle expenses are discretionary and negotiable, (entertainment, eating out, travel, vacations, new car, luxury items) and they are usually funded with income and capital gains generated from a balanced portfolio of stocks, fixed income, and cash. With a long retirement on the horizon, a portfolio is a necessary component to keep pace with inflation. Most people underestimate the impact of inflation on their retirement plans. Historically, the rate has been about 3 percent per year. Consider this: If you need $60,000 per year to live now, in 10 years you would need $80,000, and in 20 years you would need $108,000 just to keep pace with a 3 percent inflation rate. We need growth in our portfolios.

When you consider the many different scenarios that can impact your retirement, having a trusted and professional financial planner makes the process easier and more effective. It's a long journey, you should find the right guide and take them along for the trip.

Dean J. Catino, CFP®, CPRC, is a managing director and cofounder of Monument Wealth Management in Alexandria, Va., a full-service investment and wealth management firm. Monument Wealth Management is backed by LPL Financial, an independent broker-dealer and Registered Investment Advisor, member FINRA/SIPC. Monument Wealth Management has been featured in several national media sources over the past several years. Follow Tim and Monument Wealth Management on their blog Off The Wall , on Twitter at @MonumentWealth and @DeanJCatino, and on their Facebook page. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendation for individual. To determine which investment is appropriate please consult your financial advisor prior to investing. All performance references are historical and are not a guarantee of future results. Strategies involving asset allocation and diversification do not ensure a profit or protect against a loss.

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Will This Doom Your Retirement? (The Motley Fool)

Some statistics are bad enough on their own. When you pair them up, they can get really ugly:

According to a Sun Life Financial survey, "Over 90% of Americans either have no idea how much they will spend on health care in retirement, or underestimate the costs; three-fourths have no plans to meet health care costs."According to Fidelity Investments, an average 65-year-old couple retiring now will spend about $230,000 on health care in retirement.

In short, not only do you likely have no idea what health care will cost during your retirement, but it'll also likely cost a whole lot.

More bad news
Rather than thinking about their retirement budget, many folks are probably just putting some money aside and hoping for the best. That's a reckless move. Per the 2011 Retirement Confidence Survey, 67% of Americans have less than $50,000 socked away for retirement.

Let's be generous and say that you have $50,000 in your nest egg at the moment, and you're only 50 years old. If you add $5,000 to that every year until age 65, and it all grows at 8% annually, you'll end up with around $305,000. (Try it yourself with your own actual numbers, via this handy calculator.) In that scenario, you risk retiring with just $75,000 to spend on non-health-care expenses. Yikes!

Worse still, that example includes a lot of estimates and assumptions. You may well have less than $50,000 socked away. Your investments may grow at an annual average rate of 5%, not 8%. Your ultimate health-care expenses may cost you $300,000 or more. And even if they cost you $0, that $305,000 may still be far less than you need.

But fortunately...
If you're heading to the kitchen now to stick your head in the oven, stop. All is not lost.

To fix your situation, you can start by saving more every year. Conventional wisdom has long suggested saving 10% of your income, but some experts now suggest 20. If you can swing more than that, consider doing so.

You can also work a few more years. Retire at age 70 instead of 65, and you'll have five more years of saving, investing, and not tapping your nest egg. It may also mean five more years of health coverage from your employer.

Delaying starting Social Security payments can boost them a lot. Start them at age 70 instead of 66, and your checks will be 32% fatter! That will turn a $2,500 payment into a $3,300 one, and an annual sum of $30,000 into nearly $40,000 -- a rather meaningful difference.

You might also examine your investments and perhaps adjust them so that you can expect to earn more. If much of your money is sitting in CDs earning close to nothing, you might consider blue-chip dividend stocks, which can pay you 3% or 5% or more annually. You can also consider downsizing your home, taking on a part-time job, looking into a reverse mortgage, and other options.

Finally, you stand a good chance of lowering your ultimate health care costs by taking good care of yourself. You'll reap the double benefit of prolonging your life and your nest egg.

Get lots of great guidance and tips about planning for retirement here:

Longtime Fool contributor Selena Maranjian does not own shares of any companies mentioned in this article. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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7 Non-Financial Ways to Improve Your Retirement (U.S. News & World Report)

Compound interest is one of the major reasons you need to start saving for retirement early. Given enough time, even a small nest egg will grow enough in value to be an asset that can fund a comfortable retirement. But saving money isn't the only thing we need to do to prepare for retirement. Here are some non-financial ways to improve your retirement security.

[See 10 Essential Sources of Retirement Income.]

Stay in shape. You don't necessarily have to join a gym immediately. But the vast majority of Americans should consider eating less, eating healthier, and exercising more. Staying in shape takes effort, but it is well worth the time and energy. You won't be able to enjoy your retirement years if you don't take steps to maintain good health.

Be close to your family. Your job might have you traveling to far away places, but I assure you that you will want to be with your family eventually. This either means starting your own family or moving to a place where many of your existing family members reside. You might not be able to make the move right away, but you may want to move closer to relatives before or shortly after you retire.

Improve your family relationships. A family member will only improve your quality of life if you actually have a good relationship with them. If there are friends and relatives out there who you haven't talked to in ages, then it's time to reach out.

[See 6 Reasons to Tone Down Your Inflation Worries.]

Work at least part-time. Feeling like you belong and having a goal each week is a good way to prolong your life. Obviously, retirees may not want a difficult job that challenges your physical capability every day. But a part-time job in a field that you are interested in will definitely be beneficial. Consider it mental exercise, with the added benefit of making side income. While you are working, you might want to learn some skills or look for opportunities that will help you develop extra income during your retirement years.

Learn a hobby. Some people also stay mentally active by taking up a hobby. For instance, my wife is really interested in clipping coupons, which ultimately led to us starting Coupon Shoebox, an online coupons site that we could work on well into our retirement. But a hobby doesn't have to be profitable to be effective. Any hobby that you enjoy will be good for your quality of life.

Find friends. It's nice to read through everything that's happening to your friends on social media sites like Facebook. But nothing beats sitting down with a bunch of your friends and asking them what they are up to yourself.

[See 8 Last-Minute Ways to Stretch Your Nest Egg.]

Be content. Outside forces that are beyond your control will impact how happy you are in retirement. But a large portion of your happiness also comes from within yourself. The main reason individuals are happy in retirement is because they are optimistic people to begin with.

While you need to make an effort to encourage yourself to save every month, an adequate nest egg isn't the only thing you need for a secure retirement. You should also take non-financial steps to prepare yourself for a fulfilling retirement.

David Ning runs MoneyNing, a personal finance site aimed at helping others change their habits for a better financial future. He suggests that everyone to sign up for an online savings account to get more out of our hard earned money.

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5 Things About Retirement You May Not Have Considered (U.S. News & World Report)

The sooner you start saving and investing for retirement, the more money you may accumulate for your golden years. Preparing for retirement is your most important financial goal, and it must be handled with care. Here are a handful of things to keep in mind (for more, see my previous post):

Your retirement money has to be spread over 20 to 30 years. You don't need all your money on the day you retire--it has to last 20 years or more. That's why you need to establish an investment plan and stick to it. When you're young and in the accumulation stage, you have the luxury of time. If you make an investing mistake, there are things you can do to make up for it, such as change jobs or get a second job to earn more income and reduce spending. But when you retire and make a mistake, it's very difficult to replenish lost money. You need to plan ahead to ensure that your money will last for the rest of your life.

[See top-rated funds by category ranked by U.S. News Score.]

Make sure your monthly withdrawals are sustainable. How do you know how much money you can withdraw from your retirement accounts each month? This can't be a guessing game. You have to calculate it. It's important to know how long your money will last based on how much you plan to spend each month.

Inflation can cause problems over the long term. Some people stash money in ultra-safe products like certificates of deposit (CDs). The problem is that in today's environment, CDs are paying extremely low interest rates. If you put all of your money in CDs, you can be almost certain that over time you will lose purchasing power. If you can afford to live on that money today, 10 years from now it's going to cost more to buy the same things because of inflation.

[For more investing and money advice, visit U.S. News Money, or find us on Facebook or Twitter.]

Avoid having to sell investments when prices are lower. Because of longer life spans and inflation, you have to own growth investments to keep up with the rising cost of living each year. While you build wealth in your working years through growth investments, you should change your investing strategy to be more conservative as you get closer to retirement. If you don't plan correctly and the market declines for a while, you might not have enough money to pay for living expenses in retirement years, which could force you to sell holdings when prices are down.

To avoid this common mistake, hold a combination of growth investments to stay ahead of inflation, and bonds or CDs to generate some of income for your monthly or recurring expenses. This helps ensure that you don't have to sell growth investments if they have recently declined in value. Spreading your money across investments with different maturities can protect you against short-term swings in the market and provide certainty of income on a monthly basis. Meanwhile, growth investments such as stock funds typically generate higher returns and help you beat inflation.

[See Are Your 401(k) Savings Enough for Retirement?]

Beware of investments that tie you up. Annuities and other products that have surrender fees over a long time period are usually not a good idea. Some annuities have a seven-year surrender period, which means you'll pay a penalty if you sell the investment before holding it for at least seven years. At first, you might think that seven years is an acceptable amount of time because you're a long-term investor. However, seven years is a long time.

My daughter is 20 years old, and she thinks she knows everything there is to know about the world. I did too when I was that age. Then, when I was 27, I remembered how foolish I was at age 20.

Ask yourself: Is your outlook about investing different now than it was seven years ago? Is your view about life different from what it was 14 years ago? Our outlook on life, insights about ourselves, as well as our goals and aspirations change over time. When you own an investment that comes with a penalty for selling it in a certain time frame, you'll end up keeping something you would otherwise sell because you don't want to pay the penalty. You should never want to own an investment based on anything other than whether it's meeting your goals and aspirations.

Adam Bold is the founder of The Mutual Fund Store, which provides fee-only investment advice with locations coast-to-coast. He's also host of The Mutual Fund Show, a call-in radio program broadcast across the country. Bold is author of the book The Bold Truth about Investing (April 2009). Bold is Chief Investment Officer of The Mutual Fund Research Center, an SEC-registered investment adviser, which provides mutual fund and asset allocation recommendations, and research to stores in The Mutual Fund Store system.

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7 Excuses for Not Saving for Retirement (U.S. News & World Report)

There are plenty of excuses we make for not saving for retirement. Perhaps we are putting off funding a retirement account until we get a raise, get out of debt, or start a college fund for our children. But while these justifications might seem reasonable at the time, they can seriously jeopardize your ability to retire comfortably. Here's how to overcome seven common excuses for not saving for retirement:

[See How to Save for Retirement on a Low Income.]

Earn too little. It's extremely difficult to save for retirement on a small wage, and you probably have other more immediate expenses demanding your limited paychecks. However, starting out by saving even very small amounts will help you significantly in the future. "If you take just $10 a month and then increase it to $20 a month after six months, you probably won't miss it," says Kimberly Foss, a certified financial planner and president of Empyrion Wealth Management in Roseville, Calif. "Each year when you get a pay raise or cost-of-living increase or bonus, take half of that amount and put it into your retirement plan." Also, take advantage of savings perks specifically for low-income individuals who save for retirement. If you contribute to an IRA or 401(k) when your modified adjusted gross income is less than $28,250 ($56,500 for couples) in 2011, you may qualify for the saver's tax credit, which could reduce your federal tax bill by up to $1,000 for individuals and $2,000 for couples. Also, consider funneling some of your retirement savings into a Roth 401(k) or Roth IRA. Roth accounts allow you to pay income tax on your retirement savings now, while you are in a low-tax bracket, then withdrawals will be tax-free in retirement.

College first. Parents sometimes delay saving for retirement so they can pay for their children's college education. But most financial advisers caution against sacrificing your retirement savings to fund a 529 plan. "Children can borrow to go to college, but you can't borrow to retire," says Patricia Raskob, a certified financial planner and president of Raskob Kambourian Financial Advisors in Tucson, Ariz. You can always help your children to pay off their student loans later if you end up in a better financial position. A 401(k) match from your employer is likely to be the best possible return you can get on an investment. "When you are saving in a company plan like a 401(k), you are actually saving even more money because of the pre-tax benefit and you are also usually getting a matching contribution," says Carole Peck, a certified financial planner and owner of the Carole Peck Financial Center. "You don't have a match for saving for a college education and you don't necessarily have an immediate tax benefit, either." You may also be able to get relatives to chip in for your children's college costs. "Enlist people like the grandparents who, instead of giving them a $50 present at two years old, can put $40 in a 529 plan and give them a $10 gift," advises Foss. "Have other people fund 529s while you save for retirement."

[See Saving for College Versus Retirement.]

Retirement is far away. With so many immediate expenses clamoring for our limited paychecks, it's difficult to focus on a financial goal that could be decades away. But starting to save early means that you can save less each year and still reach the same goal. "Look at the long-term growth potential for starting in your 20s as opposed to starting in your 40s," says Peck. If you save $2,500 per year in a 401(k) beginning at age 25, you will have $517,808 at age 65, assuming a 7 percent annual return. However, if you wait until age 40 to start saving, you will need to save about $7,900 per year to have the same amount for retirement at age 65.

No retirement plan at work. It certainly makes saving for retirement easier if you receive help from an employer. "Seek out an employer, if you can, that has a 401(k) and matches your contributions or helps you to save for your retirement," advises Foss. If you don't receive any employer help, it's even more important to save for retirement on your own. You can defer taxes on up to $5,000 by saving in an IRA, or $6,000 if you are age 50 or older. Consider setting up a direct deposit from your paycheck to a retirement or taxable investment account to make saving as automatic as it would be if you had a 401(k).

Don't know how to invest. Picking funds can be intimidating if you don't know much about investing. If you don't feel comfortable selecting an investment allocation yourself, make an appointment with an independent expert who can explain it to you and recommend choices appropriate for your situation. "Get on the phone with somebody who is objective and spend a little bit of time walking through it," says Peck. If you don't like your initial investment choices, you can always change them later.

Pay off debt first. If you have high-interest credit card debt or personal loans, it's usually a good idea to pay those off before funding an IRA. But if you have student loans, mortgage payments, or other low-interest debt, you may be able to get a better return by investing your cash. To figure out if it's better to pay off debt or save for retirement, compare the interest and fees you are paying on your debt to how much you are likely to earn on your savings. Be sure to factor in any 401(k) match and tax deductions or credits you will earn by saving for retirement.

[See Retirement Savings Strategies for Late Starters.]

It's too late. Some people in their 50s and 60s think it's too late to begin saving for retirement. But depending on when you plan to retire, you may have a decade or more to accumulate a nest egg. There are significantly bigger tax incentives for older workers to save for retirement than younger workers. Workers age 50 and over can contribute $5,500 more to a 401(k) and $1,000 more to an IRA than younger workers are allowed to. "In your 50s, you still have a good 10 or 15 years to contribute to a retirement plan, even if you haven't started already," says Peck. "It's better to start than to rely only on Social Security or your kids later on."

Twitter: @aiming2retire

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What Retirement Savings Tax Breaks Cost Us (U.S. News & World Report)

Saving in a 401(k) or IRA and taking the tax break is good for our personal finances. But shielding your money from income tax is not necessarily good for the country's deficit.

[See 6 Tax-Advantaged Ways to Save for Retirement.]

Workers can defer paying income tax on up to $16,500 in a 401(k) and $5,000 in an IRA in 2011. For those age 50 and older, the limits jump to $22,000 and $6,000 respectively. Excluding 401(k) contributions from income tax cost the federal government $52.2 billion in 2010, according to the Office of Management and Budget. IRA tax breaks cost the federal government another $12.6 billion. Other employer-based retirement plans that allow workers to defer income tax on contributions cost $39.6 billion and Keogh plans cost $13.8 billion.

There is also a tax credit for low income workers who save for retirement. Individuals whose modified adjusted gross income is less than $28,250 ($56,500 for couples) in 2011 may claim the saver's credit, which reduces income tax by up to $1,000 ($2,000 for couples), at a cost of $1.1 billion.

[See Social Security Suspends Annual Statements.]

In total, all of these tax breaks and credits that encourage retirement savings cost us $119.4 billion in 2010. Retirement savings tax breaks cost less than excluding employer contributions for medical insurance premiums ($160.1 billion), but more than the home mortgage interest deduction ($79.2 billion).

President Obama's deficit reduction commission proposed consolidating 401(k)s, IRAs, and other types of retirement accounts into a single type of tax-favored account. The National Commission on Fiscal Responsibility and Reform also suggests capping contributions to the lower of $20,000 or 20 percent of income and expanding the saver's credit. The Bipartisan Policy Center's debt reduction task force supports maintaining existing accounts, but capping contributions at the same annual limits indexed for inflation.

[See How to Save for Retirement on a Low Income.]

There are also additional expensive tax breaks for people who invest their savings outside of retirement accounts. The lower tax rate for capital gains costs us $36.3 billion, and the reduced tax rate for dividends is worth $31.1 billion. For those who pass on their wealth to relatives, not taxing capital gains on assets left to heirs in wills costs $39.5 billion. Both the National Commission on Fiscal Responsibility and Reform and the Bipartisan Policy Center support scrapping the 15 percent tax rate on capital gains and dividends in favor of taxing these investments at ordinary income tax rates.

Twitter: @aiming2retire

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Happy People Save More Money for Retirement (U.S. News & World Report)

More than half of Americans report having less than $25,000 saved for the future, according to a 2011 Employee Benefit Research Institute survey. An Associated Press and LifeGoesStrong.com poll found that 25 percent of baby boomers have no retirement savings at all. And the American Institute of Certified Public Accountants recently revealed that 56 percent of the people in their poll are not even saving for retirement.

[See 10 Best Places for the Wealthiest Retirees.]

We've all read about celebrities who, after years of earning millions of dollars, find themselves declaring bankruptcy. On the flip side, you probably know someone of modest means who has managed to sock away significant savings. Good savers and bad savers span all income levels. Keith Redhead's research for Coventry University Business School provides some insight into what really separates savers from non-savers.

Bad savers. Redhead's review of several studies on personal financial behavior reveals that non-savers are more likely to share these characteristics:

--A negative view of other people

--A belief that they are less happy, healthy, and emotionally secure

--An inability to plan ahead

--A mistrust of financial advisers

--A higher level of fear

--A belief that outside events control their lives, rather than feeling that they are in control

[See 7 Signs You're Not Ready for Retirement.]

Good savers. It seems so simple. To save more money, simply spend less. But the ability to save money is not always the result of a conscious decision not to spend. A review of the research shows that some people simply have little desire to spend beyond a particular level. For them, saving is just the residual money remaining after they have purchased what they wanted. They save without feeling deprived. Plenty of studies have shown that beyond a certain income level, more money does not translate into more happiness. But the reverse is not true according to Cahit Guven's study for Deakin University's School of Accounting, Reversing the Question. Does Happiness Affect Consumption and Savings Behavior? Apparently it does. Guven's results show that happy people:

--Are more likely to be savers

--Are likely to save even more money

--Are less likely to have debts

--Have more self-control over their spending decisions

--Are more likely to take the future into account

--Are more optimistic, which also leads to increased savings

It should come as no surprise that people who are looking forward to retirement and have a positive view on aging save more money for retirement. Perhaps in an attempt to delay the inevitable, those with more negative views of retirement and growing old are less inclined to save for it. Maybe to save more we just need a little attitude adjustment.

[See 3 Reasons to Pay Off Debt Before Saving for Retirement.]

Happy savers. Most people think the savings problem is a will power problem. It seems you have to deny yourself things that you want in order to save more money. But it looks like it's not actually a will power problem, it's a happiness problem. So instead of forcing yourself to exercise more willpower, strive to be happier. In the best case scenario your bank account will grow along with your happiness. In the worst case, at least you're a little happier.

Sydney Lagier is a former certified public accountant. Since retiring in 2008 at the age of 44, she has been writing about the transition from productive member of society to gal of leisure at her blog, Retirement: A Full-Time Job.

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How to Save for Retirement on a Low Income (U.S. News & World Report)

Saving for retirement is especially difficult for workers with small salaries. Many low-income workers don't have access to a retirement account at work and simply have less money to build a nest egg after paying their monthly bills. Here are some strategies to save for the future on a small wage:

[See 9 Ways to Pay for Retirement.]

Set up a direct deposit. Have a portion of each paycheck automatically deposited into a 401(k), IRA, savings, or investment account. "Payroll deduction is one of the easiest ways for a worker to actually save," says David John, a senior research fellow for the Heritage Foundation. Start with as little as 1 percent of your pay and as you receive raises, direct a portion of each one into a retirement or investment account.

Take advantage of tax breaks. Saving in a retirement account has the added bonus of reducing your current or future taxes. Traditional 401(k)s and IRAs give you a tax break in the year you make the contribution, but income tax is due upon withdrawal. If you expect your income to grow significantly in the future, it can be smart to contribute after-tax dollars to a Roth 401(k) or Roth IRA. Roth accounts allow you to pay tax on your nest egg now while you are in a low-tax bracket, then withdrawals, including earnings, will be tax-free in retirement.

Claim the saver's credit. There is a tax credit specifically for low-income workers who save for retirement. If you contribute to a retirement account such as an IRA or 401(k) and your modified adjusted gross income is less than $28,250 ($56,500 for couples) in 2011, you may be able to claim the saver's credit. This credit is worth up to $1,000 for individuals and $2,000 for couples and can be used to reduce the federal income tax you pay, but is not refundable.

Redirect your tax refund and tax break. If you don't need your tax refund for immediate expenses or debts, consider saving a portion of it for retirement. Workers are also currently receiving a temporary 2 percent tax break on their Social Security payroll taxes in 2011. For someone who earns $30,000 annually, the tax break is worth $600. Consider directing that tax savings into a retirement account.

[See 6 Ways to Spend Your Social Security Payroll Tax Cut.]

Minimize investment costs. The expenses and fees associated with an investment are deducted from your returns. "An IRA charges a fee to open the IRA, it charges annual fees, it charges closing fees if you decide to change jobs, it charges a trade commission if you trade. If you get a fund of funds, like a target-date fund, you are being charged for a management fee and then the underlying mutual fund fees," says Teresa Ghilarducci, director of the Schwartz Center for Economic Policy Analysis at the New School for Social Research. Avoiding as many of these fees as possible and choosing funds with low expense ratios will allow your nest egg to grow faster.

Delay retirement. Longer life spans mean even more years of retirement that need to be financed. Workers without traditional pensions may not be able to retire at the same age their parents stopped working. "Postponing retirement is an extremely powerful tool for those who are able to do it," says Mark Iwry, deputy assistant secretary for retirement and health policy at the U.S. Department of the Treasury. "You've got more years of earning. You've got fewer years of consuming as a retiree." Working longer doesn't mean you will need to work indefinitely. "People are living longer, healthier lives and fewer of them are working in physically demanding jobs," says Barbara Butrica, senior research associate at the Urban Institute. "Working an additional year, we found, raises retirement income by 9 percent overall and by 16 percent for low-wage workers."

Learn about Social Security. Social Security payments are the biggest source of retirement income for low-wage workers. "Social Security benefits are much more important to people with low income than private savings probably ever will be," says Butrica. The age when you decide to start your benefit can make a big difference in how much your monthly payments will be for the rest of your life. "Think carefully about whether you want to start that Social Security benefit right away when you hit 62, or whether it's really more valuable to you to wait until age 70 if you can do so," says Iwry. Monthly payouts increase for each year you delay claiming up until age 70.

[See 10 Ways to Boost Your Social Security Checks.]

Seek a job with good retirement benefits. Finding a job that offers a traditional pension, a significant 401(k) match, or a profit-sharing plan can significantly improve your retirement security. But only about half of the workforce has access to retirement benefits at work, and low-income workers are the least likely to have them. "About four in every ten 25- to 29-year-olds who are working are working in jobs that don't offer retirement plans," says Margery Austin Turner, vice president for research at the Urban Institute. "Low-income workers aren't accumulating the assets they are going to need for a secure retirement." When an employer contributes to a retirement plan, you can build a significant nest egg faster.

Don't spend your savings early. Once you begin to build a nest egg, try not to spend any of it before retirement. "Many of the withdrawals from 401(k)s and IRAs were associated with job loss and disability and investment sorts of things, like home purchases," says Butrica. For these types of emergencies you can sometimes tap your IRA savings early without being hit with the typical 10 percent early withdrawal penalty. But early withdrawals also mean that you won't have that money and the valuable compound interest it could have generated in retirement. "I think we need to encourage people to avoid unnecessarily dipping into their savings before retirement," says Butrica. "Workers must consistently make large contributions to their accounts to accumulate significant savings. This is going to be very difficult for low-wage workers to do."

Twitter: @aiming2retire

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5 Ways to Make Saving for Retirement Easier (U.S. News & World Report)

Retirement saving is a crucial part of our personal finances. But with so many more immediate needs and wants, it is difficult to allocate resources to a retirement that could be decades away. Here are five ways to make it easier to save for retirement.

[See 10 Places to Go Carless in Retirement.]

Create a tangible benefit. Most people think of retirement as a number, such as a dollar amount they need to reach or a monthly income goal. Instead, think of the lifestyle that you are saving up for. Translate the savings goal into what you will actually do. Is golfing every day or seeing more of your kids and grandchildren your dream? These goals should be your motivation to save. No one wants to save money just to reach a certain number, but everybody will work hard to get to do the activities they dream of.

Make it automatic. One of the best benefits of saving in a 401(k) is that the money never enters your checking account. When you don't see the extra money you learn to live with that smaller paycheck and the savings will rack up over time. Even if you don't have a 401(k) at work, make sure you pay yourself first.

[See The 5 Worst Ways to Save for Retirement.]

Use your budget as a guide only. Some people allocate a percentage of their income to save for retirement and then use the rest for expenses. As a result, many people end up spending all their discretionary income each month. Instead, monitor your spending and think about the value that you are getting from every purchase. You might find that you can save quite a bit more money if you cut out things you don't need or enjoy. Having a budget is a good start, but also work on improving it.

Make more income. There are a variety of ways you can reduce your monthly expenses so that you can save more. But once you have eliminated all the expenses you are willing to cut, making more money is probably a better way to boost your savings. The more you make, the easier saving money is, as long as you don't inflate your lifestyle when you get raises. As your income grows, aim to live well without spending a lot of money.

[See 5 Reasons You Shouldn't Contribute to a 401(k).]

Create a plan and execute it successfully. Having a plan and watching your nest egg grow can give you an incredible sense of achievement and satisfaction. Once you create a solid retirement plan and begin hitting your savings goals every month, it becomes a powerful motivator to save even more.

David Ning runs MoneyNing, a personal finance site aimed at helping others change their habits for a better financial future. He suggests that everyone to sign up for an online savings account to get more out of our hard earned money.

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Why Saving For Retirement Isn't Enough (U.S. News & World Report)

The basic rules of personal finance are simple to understand: Spend less than you earn, save for the future, and repeat the process. In principle, it sounds easy. But there is more to retirement planning than just saving whatever you have left over at the end of the month. Here are several other important ways to prepare for retirement.

[See 10 Places to Go Carless in Retirement.]

Pay yourself first. If you don't make saving a priority, you probably won't save enough to finance a comfortable retirement. Treat investing like a bill and set up an automatic contribution plan through your employer or investment firm. If you don't make saving automatic, you risk not having any money left over at the end of the month to save.

Set up an investment plan. Simply shoveling money into a savings account won't give you the growth you need to keep up with inflation. Part of your investment plan should include a well balanced investment portfolio that is designed to cope with the highs and lows of the economy and keep pace with inflation.

[See 5 Costly Retirement Investment Mistakes to Avoid.]

Leverage the investment tools available to you. Many Americans have access to an employer-sponsored retirement plan, such as a 401(k), 403(b), the Thrift Savings Plan, or a variety of small business retirement plans. These retirement accounts offer tax advantages now, give you the benefit of investment growth without the drag of taxes, and often come with a matching employer contribution, which is essentially free money for your retirement. You should make it your goal to maximize any available matching contributions. If you don't have an employer-sponsored retirement plan, consider opening an IRA, which also offers great tax benefits and flexible investment opportunities.

Invest outside of retirement accounts. You don't have to limit your investments strictly to retirement accounts. Investing for cash flow is a great way to enhance your standard of living now or prepare for retirement in the future. You could invest with dividend stocks, Real Estate Investment Trusts (REITs), or bonds at discount brokerage firms. Alternatively, you could purchase real estate and collect rent. Both of these options require work, but they could also help you retire earlier and with a higher standard of living than you may otherwise experience.

[See 5 Reasons Your 401(k) Isn't Enough for Retirement.]

Control debt. You won't be able to save for the future if you have more going out every month than you have coming in. Debt is a tool which can be leveraged for useful purposes, but left unchecked, it can bring financial ruin. Work on eliminating any debt you may have. Once it is gone, do your best to prevent it from returning and becoming a part of your lifestyle. If you're looking to cut some debt, go for the big wins first, such as lowering your mortgage payments. Also, consider transferring your credit card balance to a 0 percent balance transfer credit card, which will eliminate your credit card interest for a set time frame. These money moves can free up hundreds of dollars each month, which can be used to accelerate your debt repayment and then to increase your standard of living or savings plan.

Ryan Guina is a U.S. military veteran, writer, and professional in the corporate world. He blogs at Cash Money Life and The Military Wallet.

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The 5 Worst Ways to Save for Retirement (U.S. News & World Report)

Many of us should be ramping up our efforts to save for retirement. But not all methods of saving money are worth the cost. Here are five retirement saving strategies that could actually leave you worse off in retirement.

[See 10 Places to Go Carless in Retirement.]

Neglecting your health. Never neglect your health in exchange for saving more money. If you aren't healthy, there's really no point in having a bunch of money. When you feel dizzy and tired all the time, watching a bank balance with a bunch of digits is not going to help at all. A big part of a comfortable retirement involves having a healthy body. So, consider what you are really sacrificing when you skip preventative care or eat unhealthy food to save a few dollars now.

Saving instead of paying off credit card debt. Whether you should save for retirement or pay off debt is an age-old question. But high interest credit card debt should always be eliminated first. It doesn't make sense to try earning a modest return while paying 20 percent a year or more for interest.

[See 5 Reasons You Shouldn't Contribute to a 401(k).]

Saving in ways you can't openly talk about. If you can't comfortably talk about how you are saving money for your retirement, then it might not be worth the cost. It would be very difficult to live a comfortable retirement knowing you had to cheat others to obtain it. If you have to steal or scam your way into your millions, you will eventually regret it. You will enjoy your retirement more knowing that you obtained it through honest and legitimate hard work.

Making today miserable. Saving for tomorrow involves learning and accepting the idea of delayed gratification. But while the future is important, you need to have some fun today too. Don't forget about retirement, but also remember that you have to live a little. Money isn't for hoarding.

[See 8 Last-Minute Ways to Stretch Your Nest Egg.]

Never giving. Practically everyone in our society can afford to give. If money is tight, we can probably afford to donate our time through volunteer work. We are truly lucky to have a hot meal on our table every day and have many luxuries in our lives that we often take for granted. Giving will bring you a lifetime of incredible memories, which is much more meaningful than a few numbers in a bank statement.

Retirement planning is an extremely important aspect of our lives. But contributing to a 401(k) account should never be your number one priority, unless you want to miss out on a lot in life.

David Ning runs MoneyNing, a personal finance site aimed at helping others change their habits for a better financial future. He suggests that everyone to sign up for an online savings account to get more out of our hard earned money.

Browse your computer here

The 5 Worst Ways to Save for Retirement (U.S. News & World Report)

Many of us should be ramping up our efforts to save for retirement. But not all methods of saving money are worth the cost. Here are five retirement saving strategies that could actually leave you worse off in retirement.

[See 10 Places to Go Carless in Retirement.]

Neglecting your health. Never neglect your health in exchange for saving more money. If you aren't healthy, there's really no point in having a bunch of money. When you feel dizzy and tired all the time, watching a bank balance with a bunch of digits is not going to help at all. A big part of a comfortable retirement involves having a healthy body. So, consider what you are really sacrificing when you skip preventative care or eat unhealthy food to save a few dollars now.

Saving instead of paying off credit card debt. Whether you should save for retirement or pay off debt is an age-old question. But high interest credit card debt should always be eliminated first. It doesn't make sense to try earning a modest return while paying 20 percent a year or more for interest.

[See 5 Reasons You Shouldn't Contribute to a 401(k).]

Saving in ways you can't openly talk about. If you can't comfortably talk about how you are saving money for your retirement, then it might not be worth the cost. It would be very difficult to live a comfortable retirement knowing you had to cheat others to obtain it. If you have to steal or scam your way into your millions, you will eventually regret it. You will enjoy your retirement more knowing that you obtained it through honest and legitimate hard work.

Making today miserable. Saving for tomorrow involves learning and accepting the idea of delayed gratification. But while the future is important, you need to have some fun today too. Don't forget about retirement, but also remember that you have to live a little. Money isn't for hoarding.

[See 8 Last-Minute Ways to Stretch Your Nest Egg.]

Never giving. Practically everyone in our society can afford to give. If money is tight, we can probably afford to donate our time through volunteer work. We are truly lucky to have a hot meal on our table every day and have many luxuries in our lives that we often take for granted. Giving will bring you a lifetime of incredible memories, which is much more meaningful than a few numbers in a bank statement.

Retirement planning is an extremely important aspect of our lives. But contributing to a 401(k) account should never be your number one priority, unless you want to miss out on a lot in life.

David Ning runs MoneyNing, a personal finance site aimed at helping others change their habits for a better financial future. He suggests that everyone to sign up for an online savings account to get more out of our hard earned money.

Browse your computer here

The Key to Beat Inflation in Retirement (The Motley Fool)

Stocks go up and stocks go down, but the one thing you can count on is this: Prices of just about everything you'll need after you retire will go up over time. The challenge is figuring out how to make your retirement investments grow enough to keep up with the rising prices of your basic necessities. But with a little work, you can find the best ways to beat inflation -- and they aren't necessarily where you might expect.

Why inflation is a money-killer
When you talk about ways to lose money, most investors immediately think of stocks prices dropping like a stone during bear markets. The impact that stock declines have on your net worth is obvious: Your brokerage statements tell the tale each and every quarter. When bear markets strike your investments, you'll know about it.

Inflation often isn't that straightforward. Occasionally, big moves like we've seen in oil and food prices lately make it all too clear just how painful rising prices can be. But even the more gradual pace of inflation is enough to reduce the purchasing power of your portfolio considerably over time -- and more importantly, you have to keep your eyes on a moving target if you want to be certain that you'll be able to afford everything you want after you retire.

The obvious inflation plays
Because inflation has been a constant threat for so long, financial products evolved to help fight its effects. In particular, the U.S. Treasury came out with its inflation protected securities, or TIPS, which are bonds whose principal value is indexed to inflation and changes with the Consumer Price Index.

Investors who want to own TIPS have several options. The TreasuryDirect service sells them directly to the public, and many discount brokers allow you to buy TIPS at auction for little or no cost. In addition, mutual funds and ETFs such as iShares Barclays TIPS Bond (NYSE: TIP - News) and SPDR DB International Government Inflation-Protected Bond (NYSE: WIP - News) give you a full diversified portfolio of TIPS and similar instruments from governments around the world.

Another way those in or near retirement can fight rising prices is to buy immediate annuities whose payouts are linked to changes in inflation. Again, these annuities typically use the CPI as a reference point, but by making sure your payouts will rise generally with overall costs, you'll put yourself in a better position to outlast your money and preserve its purchasing power.

Finally, a traditional way that many investors have struggled against inflation is by buying gold. Many remember gold as a lucrative investment during the late 1970s, when double-digit inflation posed a major threat to the U.S. economy. Although it fell out of favor after inflation levels subsided, the popularity and ease of use of the SPDR Gold Trust (NYSE: GLD - News) ETF, along with big jumps from the yellow metal's lows from 10 to 12 years ago, have helped gold recover its reputation as a method for fighting inflation.

Build a better link
But the way I prefer to fight inflation addresses a key argument against CPI-linked measures: that the CPI doesn't accurately reflect a person's own experience of rising prices. Although the CPI is an aggregate measure, everyone's individual tastes lead to a different effective rate of inflation. If you like specialized products, the CPI is unlikely to reflect the price behavior you see in the things you buy.

The key, then, is to connect what you need with investments that prosper when your necessities rise in price. For instance, if you need to protect against higher energy costs, then investing in energy giant Chevron (NYSE: CVX - News) or a broader-based fund like the Energy Select SPDR (NYSE: XLE - News) should help you match higher prices with rising share values.

But what if prices fall? Those stocks might get hurt, creating losses in your investment portfolio and offsetting the benefit you'll get from lower costs for your everyday needs. Still, many retirees might consider that risk worth it in order to hedge against the possibility of wallet-busting price increases.

Get personal
Investing with inflation in mind isn't as simple as it looks. But if you take the time to see what you'll truly need after you retire, you can tailor your portfolio to move up and down with the prices of those necessities. That should give you peace of mind you can't get from any other investment.

Now more than ever, starting a watchlist can help you keep track of all your investments. Add any company or ETF you want and start getting valuable updates on the latest news about your favorite investments. Also, you'll get immediate access to a new special report, "6 Stocks to Watch from David and Tom Gardner." Click here to get started.

Fool contributor Dan Caplinger likes to win a fight. He doesn't own shares of the companies mentioned in this article. Pfizer is a Motley Fool Inside Value selection. Chevron is a Motley Fool Income Investor pick. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy never loses its keys.

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Why I Didn't Pay Off My Mortgage Before Retirement (U.S. News & World Report)

I have a confession to make. I retired with a mortgage. Most retirement planning professionals say this is a big no-no. I'm not so sure.

[See 10 Ways to Boost Your Social Security Checks.]

I'm not going to try to convince you that the tax deduction makes it worthwhile (it doesn't), or that your money is more wisely invested in the stock market (it isn't). I will tell you that cash in your bank account will put food on the table, and that equity in your home won't pay the electricity bill. But that's not the reason I haven't paid off my mortgage. It's because of inflation.

Thirty years ago, a large pizza cost $6, a pound of ground beef was $1.51, and a bottle of whiskey ran you $5.99. Today the pizza will set you back $10.30, the homemade burgers, $2.27, and it will cost you $12.99 to drown your sorrows in that bottle of whiskey. And yet, after adjusting for inflation, each of these items is actually cheaper now than each was back then.

To put this all in perspective, the average household income was $17,710 in 1980. By 2009 it had nearly tripled to $49,777. We don't notice the 30-year creep in prices all that much because we continue to earn inflated dollars as well. That means we can afford the $172,600 price tag of the average home in 2010, even though the average home was only $64,200 three decades ago.

[Visit the U.S. News Retirement site for more planning ideas and advice.]

Inflation has been mild the last couple of years. Most experts expect that to change in the not-too-distant future, and some fear that when inflation does come back it won't creep but sprint. Inflation erodes the purchasing power of a dollar. If you have $100,000 in the bank today, an annual inflation rate of 3.5 percent would effectively snatch about $30,000 over ten years. Yes, you'd still have $100,000 in the bank a decade later, but it would only buy you what $70,000 buys you today. That's how inflation hurts.

Inflation actually helps you, though, when it comes to debt. A mortgage enables you to lock in today's home price, but pay for it with tomorrow's inflated dollars. To illustrate simply how this works, let's assume you bought a home back in 1980 for $64,000 and borrowed 100 percent of the purchase price. Assume you just now had to pay back that loan. It would cost you over $170,000 to buy that home again today, so writing a check for $64,000 would feel like a real bargain. That's because you get to use today's inflated dollars to pay back money you borrowed all those years ago, when $64,000 had a lot more purchasing power than it does today. With interest rates so low right now, a mortgage can be an excellent hedge against inflation.

[See To Retire Early, Don't Have Kids.]

If you are worried about runaway inflation, you're better off taking the money you would have used to pay off your mortgage and investing it instead in Treasury Inflation-Protected Securities (TIPS). Assuming you have a $100,000 balance on your 5 percent fixed-rate mortgage, you'd save about $47,000 in interest over the next ten years if you paid off that mortgage today. But if inflation averages 3.5 percent each year over the coming decade, you'll come out ahead if you park your money in TIPS instead of your mortgage. Even with current 10-year TIPS rates hovering around 1 percent, the interest and principal on your bond in 10 years would produce enough to pay off the mortgage, the interest, and put an extra $5,000 in your pocket. If inflation charges even harder, you'll walk away with even more.

Sydney Lagier is a former certified public accountant. Since retiring in 2008 at the age of 44, she has been writing about the transition from productive member of society to gal of leisure at her blog, Retirement: A Full-Time Job.

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