Smart SpendingSmart Spending

11 tips for retiring when you're nervous about the economy

Retirement today probably won't be the same type of retirement your parents or grandparents had.

By MSN Money Partner Oct 18, 2013 12:42PM

This post comes from Kentin Waits at partner site Money Talks News.

Money Talks News on MSN MoneyAffording retirement can be a challenge even in the best economic times. But in our post-recovery world with its steady stream of fiscal uncertainty, full retirement can seem the stuff of legend.

Couple looking at computer © CorbisSurely, retirement is a more complicated proposition these days: A good 401k balance combined with Social Security just won't cut it. Today, retirement planning needs to be more aggressive and focused, funds need to be more broadly sourced, and retirement itself needs to be more flexibly defined.

If you're planning to retire in spite of current economic uneasiness, the following strategies can help make your dream a reality:

Before you retire

Feed your 401(k). For secure retirement, employees need to max out their 401k contributions, leveraging the trifecta advantage of a lower taxable income, company matching funds, and tax-free growth of contributions. For 2013, the annual 401k contribution limit for participants under age 50 is $17,500. If you're 50 or older, the government allows "catch-up contributions," which bumps up that limit by $5,500.

Of course, as with any investment, it's essential to understand your comfort level with risk, gravitate toward more conservative funds as you near retirement, pay close attention to your quarterly statements, and protect the integrity of your balance by not borrowing against it.

Don't forget about Roth IRAs. Though IRAs have a lower annual contribution limit than 401k plans -- $5,500 for those under age 50 and $6,500 for those 50 or older -- Roth IRAs are becoming an important part of retirement planning. With a Roth IRA, investors contribute money that’s already been taxed, and that money grows tax-free and isn't taxable upon withdrawal.

Many economists and financial experts agree that taxes are bound to rise eventually. As a result, investors young and old are fully funding their Roth IRAs and choosing to take the tax hit now to avoid the roulette wheel of future rates.

Optimize your Social Security benefits. Few people realize the degree to which their Social Security benefit amounts are under their control. By boosting income during your working years, working longer, delaying the age at which you begin claiming benefits, and clearing certain types of debt before benefits begin, you can maximize your monthly payments.

Anyone can learn more about their current estimated benefit from Social Security by setting up an account and accessing the information through Review the earnings figures for each of your employed years, look for mistakes and have them corrected. This information is the basis for your future benefit and its accuracy is important.

Defund your refund. Getting a fat tax refund at the end of the year might feel like a win, but often it means a flub in financial planning. That accumulated money has served as an interest-free loan to the government throughout the year. That means it hasn't had the chance to work for you and help fund your retirement plans. If your withholding tax consistently generates a refund every year, it’s time to review and revise your W-4.

Pay off your mortgage or strategically downsize. If you're a homeowner, use the years that lead up to retirement to aggressively pay down your mortgage. Since housing is typically our largest single expense, there's a real tactical advantage to owning your home outright by the time you retire. If you'll be mortgage-free well before retirement, modify your budget and redirect those funds into a Roth IRA or other retirement investment.

If your home is too large or too expensive to maintain in retirement, consider a strategic but comfortable downsize. Less room and less land typically equal lower spending and lower property taxes. Pocket any profits from the sale of your previous home and use it to help fund your retirement.

Don't be consumed by consumer debt. Voluntarily taking on long-term consumer debt as you look toward retirement is like gaining weight and shedding muscle in preparation for a marathon. Avoid all consumer debt that can't be paid off in full within 30 days. Combined with a hiccup in employment or an unexpected major expense, interest on consumer debt can derail even the best-laid plans and most carefully calibrated retirement calculations.

When you retire

Consider "para-retirement." A happy retirement doesn't necessarily require a hammock and a beachside retreat. Saying goodbye to full-time employment can free you to pursue part-time roles, freelance opportunities, or employment in another field where work doesn't feel quite so much like work. Para-retirement lets you dabble in all sorts of income-producing work and still provides a sense of freedom that's the hard-won reward of decades of labor. Consider leveraging your skills in new ways to take some of the financial pressure off your retirement investments.

Keep it simple. Often, retiring in a tight economy means embracing a less complicated lifestyle than the one you enjoyed during your working years. If retirement is your priority and choosing when, where and if you work seems like the greatest luxury of all, understand that both your lifestyle and financial overhead may need to be simplified.

Focus on the smaller pleasures of life and look for economic advantages that more free time can offer. What conveniences no longer seem quite as important, now that your schedule is flexible? Can you go from two cars to one? Do you have more time to cook meals at home instead of eating on the run?

Guard your health. A successful retirement involves body and mind, not just money. Replace your 9-to-5 work world with passions and projects to keep you physically and mentally fit. Dust off those decades-old ideas, hobbies and interests and use them to fuel the next phase of your fully engaged life.

Cherish your community. A close-knit group of friends, family, colleagues and neighbors is the silent wealth that no one seems to mention when they discuss retirement planning. Cultivating our relationships not only adds to the richness of life in retirement, it can help us face new logistical challenges, compensate for more modest means, and provide security as we grow older.

Flex your green thumb. Though it may sound quaint, planting a garden is a simple way to integrate several of the points we've covered here: Cultivating a garden can help keep us fit in retirement. Adopting a diet that includes fresh fruits and vegetables can promote better health. Producing a portion of our own food can take some pressure off our budgets, and gardening can build a sense of community and bring neighbors together.

Of course, everyone's retirement picture is unique and some strategies may not work for every reader. But the take-away is this: Retirement today definitely takes more planning, may take some creative downsizing, and probably won’t be the same type of retirement that your parents or grandparents had.

The good news is that retirement is still very possible and, with a clear blueprint, those years can be rich, full of reinvention, and financially secure.

More on Money Talks News:

Oct 18, 2013 10:20PM
My roomie's friend stopped by tonight.  This big young oaf has been living on welfare forever.  Never holds a job, never does anything, can't get along with people.  I guess when he "retires" it will just be more of the same for him, sponging off the taxpayers.
Oct 18, 2013 3:34PM
Best tip?   Stop voting for state loving Nazis who practice Keyensian/Obamanomics.
Oct 18, 2013 10:53PM
Heres a tip, when you turn 62 years old take your money and run somewhere else than this country. You as a tax payer deserve that and there are a lot of places in south america you can afford! Check it all out and quit waisting your time on this mess!
The best tip is to be connected to someone in D.C., or connected to someone connected to someone in D.C.. I don't often greedy, but when I do, its in D.C..   Stay thirsty my friends
Oct 18, 2013 3:46PM
Defund your refund and earn a whopping .5% or so (if you don't spend it along the way).
Oct 19, 2013 6:58PM
While the recession affected the retirement funds that many people accumulated a major part of the problem is that many people did not plan for retirement and start to save/invest earlier on in life. An earlier start in saving/investing for retirement, taking advantage of any employer matching plan, avoiding risks with retirement funds and planning for multiple streams of income when retired helps to ride out the bumpier times like this latest recession. The key to successful retirement is planning. You have to plan for your financial needs as well as your lifestyle requirements. There are many retirement sites that provide retirement information. I recently found the site Retirement And Good Living that offers information on finances, health, retirement locations and more. It also has a great blog of guest posts about a variety of retirement topics. I never understand why more people do not take advantage of these type of sites. Most are free.

Oct 18, 2013 9:23PM
#12---place your energies into impeaching Obama. 
Oct 21, 2013 11:34AM

renounce your citizenship and become an "undocumented immigrant" healthcare, free everything and no more pesky insurance bills to worry about!

Oct 18, 2013 7:06PM
Move out of the country.  Transfer your wealth out of the country to a place with lower tax rates and smaller dependency class.  Turn in your citizenship.  Enjoy the fruits of your labor without having to pay for those around you who refuse to pay their own way in this country.  Let this country become another European socialist state and see how far it goes when everyone with wealth does likewise.
Oct 21, 2013 8:13AM
Stay on good terms with children and siblings.  Move in with siblings and get help from children.  Pretend you are the Waltons and live in a home with extended family so all can share the burden.  Vote for conservative candidates so your tax load will go down and your ability to get and hold a part time job will be enhanced as jobs grow under a conservative system.
Oct 18, 2013 4:38PM
The best thing all of us can do is start to organize and then go after Wall Street, big corporations and government. Stop the stealing and greed that these people are ding to us. 
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
100 character limit
Are you sure you want to delete this comment?


Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.


Smart Spending brings you the best money-saving tips from MSN Money and the rest of the Web. Join the conversation on Facebook and follow us on Twitter.