Baby Boomers and Retirement Savings

More than half of workers 60 years old or older say they are postponing retirement plans, according to a new study by employment site CareerBuilder.

Despite an improved economy and rising wages, a large percentage of seniors in the workplace appear to be worried they won't have enough money to stop working.

The survey shows 53 percent of age 60-plus workers are putting off retirement, with significantly more men making that decision than women. Four out of 10 workers said they don't think they can retire until at least age 70.

It's going to have an impact

"Postponing retirement will make an impact across all of our country's workforce, along with retirement policy and financial and health care planning," said Rosemary Haefner, chief human resources officer at CareerBuilder. "With workers staying in their jobs longer, employers are adjusting hiring needs, but also reaping the benefits of the extra skills and mentoring abilities of mature employees."

While employers appear to be benefiting from the trend, what about the workers themselves? Few appear to be putting off retirement because they enjoy their jobs. Rather, it's a matter of addressing the uncertainty retirement brings.

Nearly a quarter of the workers in the survey admitted they don't know how much money they need in savings in order to stop getting a regular paycheck.

When asked to make an estimate, 20 percent of workers said they think they can retire on $500,000 in savings. Thirty-one percent said they would need between $500,000 and $1 million.

Challenges

Getting to those amounts have proven to be problematic. Roughly one in four people in the survey who are at least 55 said they do not contribute to a 401(k) or IRA retirement plan. Younger workers have a better record on that score, according to CareerBuilder.

As most Americans have longer and healthier lives, the concept of retirement has undergone changes. The financial crisis of 2008 has also had an impact, disrupting retirement savings plans for many just as they were entering what should have been their peak earning years.

A decade of stagnant wages hasn't helped matters. A 2017 study from Country Financial found over half the workers it surveyed were not saving for retirement. The most common reason was the difficulty in paying current expenses, with nothing left over for savings.

Here's yet another study underlining the problems facing retirees, and as a result, how retirement itself may be fundamentally changing.

Changing as in, maybe we aren't going to retire anymore, or not until we are too weak and infirm to be productive.

The study comes from Country Financial, which reports consumers are worried about being able to afford retirement. But despite that concern, it also finds over half the people in the survey said they aren't saving money for retirement.

What that suggests is people really aren't that concerned, or they have so much trouble meeting day-to-day expenses they don't think they have any money to put away. Either way, the notion of 21st century retirement is probably changing.

Constant leisure

For some, retirement holds out the promise of constant leisure, or the freedom to do whatever they want, without having to earn a living. To do this, however, requires a pretty significant income stream. And other studies have clearly indicated that most people approaching retirement don't have the assets for that. So there is a wide swath of the population that isn't going to achieve this kind of retirement.

The Country Financial survey suggests that more and more people now plan to keep working and not retire until the very end of their lifespan. Over half of those in the study -- 51% -- do not include retirement in their long-term financial goals.

The Economic Policy Institute came up with similar findings; nearly half of families have no retirement savings.

Finding people in the workforce at age 70 or more is no longer uncommon, and may in fact become more common. The Pew Research Center reports only about 13% of Americans 65 and older were still working in 2000. Last year, more than 18% were.

Working retirement

Some people, in fact, enjoy what they do and don't want to quit. Others might want to leave their current job but try something else, even if it is part-time.

Financial advisors, of course, point out that someone transitioning to part-time employment in their later years had better have some financial resources to supplement their reduced income.

"Many Americans are outliving their assets because they did not include retirement in their long-term financial goals," said Doyle Williams, an executive vice president at Country Financial. "We strongly encourage people to develop a long-term plan so they can eliminate the fear of never being able to retire. By taking some simple steps almost everyone can have a plan in place to secure their financial future."

Because people are now routinely living well into their 80s and beyond, the notion of walking away from income-producing work at 65 may be a quaint notion. Still, even if you aren't saving for retirement, you should be saving for something. Chances are, you're going to need it.

The financial crisis, which deepened an existing recession, was a major blow to the U.S. economy.

Since then, the nation has been on a slow path toward recovery. Today, many consumers are feeling a lot better than they did a few years ago. Baby Boomers, however, are among the least likely to feel that way.

A study commissioned by the Bankers Life Center for a Secure Retirement found only 2% of middle income Boomers think the economy has fully recovered. Sixty-five percent don't think they have benefited at all from the recovery.

And while nearly all the Boomers in the survey said they expect to retire one day, the study found a near universal adjustment to just what form retirement will take.

Savings and earnings have fallen

Here are a couple of reasons why: among the group saying it has not benefited from the recovery, more than half say their money in savings is less than before the crisis. Four out of ten say they are earning less money than they did a decade ago.

Back then, 45% of middle income Boomers said they expected to have no debt in retirement, living in a home with no mortgage. Today, only 34% have that expectation.

Boomers contemplating retirement are also planning to be more dependent on Social Security income. Ten years ago, 40% of Boomers said they expected their retirement savings would be their primary income source. Today, it's 34%.

It's no surprise, then, that many Boomers appear to be reconsidering plans to stop working. The study shows nearly half of Boomers -- 48% -- plan to expect to hold down a full or part-time job after they reach retirement age. Before the financial crisis, it was just 35%.

"Ten years ago, Baby Boomers had a clear vision of what a personally satisfying retirement looked like," said Scott Goldberg, president of Bankers Life. "But today, many are realizing they will not be as financially independent in retirement as they once expected."

What to do

If you are in your 50s or 60s, you don't have the luxury of a lot of time to build wealth for your golden years. But there are steps you can take now to become better prepared. They involve cutting expenses and increasing savings.

First, AARP suggests defining what you want retirement to be. And be specific. If you want to travel, for example, think about what kind of travel. And it should go without saying, you need to be practical.

Next, add up your assets, both financial and personal. If you have developed a skill over the years related to a favorite hobby, maybe that can be a source of income after you quit your day job.

Decide when you want to start collecting Social Security. The monthly payments will be a lot larger if you can put it off until age 70.

Analyze your budget, looking for ways to trim spending. Just a little each month can add up to growing savings.

With the leading edge of the huge Baby Boom population entering their retirement years, retirement planning is a big deal. But this phase of life can take many forms.

Planning to tour the country pulling an Airstream trailer? Your needs will be different than if you plan to launch a new career in retirement.

When talking about retirement, the discussion almost always starts with money. Not going to work every day means you won't be bringing home the same sized paycheck. So the first question is how you will make up the difference.

Can't depend completely on Social Security

Social Security will provide a source of monthly income, but not a very big one. You'll likely need other sources of income, such as a pension – which is pretty rare these days – or a retirement savings account.

According to the Labor Department, fewer than half of Americans know how much they need to save for retirement, but in fairness that number is hard to pin down until you decide how you plan to spend retirement.

If you plan to downsize, moving into a home that you can purchase with no mortgage, in a low cost-of-living area, you'll need less money each month than if you plan to spend half the year traveling.

That said, it is easy to underestimate your needs. The government says you'll probably need 70% of your pre-retirement income to keep up.

Is a part-time job the answer?

That's why a growing number of early Baby Boomer retirees are still working in some form or another. After a successful career, they have a lot of knowledge and expertise. Often, their former employers are eager to tap into that on a part-time basis.

Of course, after 40 or more years working in a profession or at a job you really didn't like, the prospect of continuing it, even on a part-time basis, might not seem that attractive. But many retirees take the opportunity to try their hand at something new. The website NewRetirement.com has some advice for finding the right fit.

Growing optimism

The good news is people approaching retirement are a lot more optimistic today than they were just after the Great Recession. A new study by T. Rowe Price shows 47% of Baby Boomers and Gen Xers believe their ideal retirement is “very attainable,” suggesting they have either given it serious thought and have their ducks in a row or have no idea of what's involved.

The subjects in the study were mostly investors, suggesting they have been building wealth. When it comes to visualizing their retirement years, the majority see it as “a time to relax.” Only 38% plan on “reinventing themselves.”

A number of recent surveys have found anxiety among Baby Boomers about retirement, primarily concerns about not having enough money.

The NHP Foundation, a not-for-profit provider of affordable housing, has drilled a little deeper into those concerns. It says a poll of Americans aged 55 and older found the cost of putting a roof over their heads is a major issue.

The survey found 30% of Boomers worry at least once a month that they won't be able to afford their home. About 42% of retired people in the survey say they worry about it at least once a day.

While Millennials are known to have housing anxiety, caught between high rent and rising home prices, Boomers were thought to be more housing secure. But it turns out many Boomers who don't worry about their own housing costs do worry about those of their adult children.

Multi-generational anxiety

"The anxiety is now multi-generational," said NHPF CEO Richard Burns. "So we are working today to increase our stock of affordable housing to ensure that this and future generations are able to afford desirable places to live."

Previous NHP surveys have uncovered other concerns about housing affordability. One discovered that up to 75% of the U.S. population is worried at any given moment about losing their home. One that focused exclusively on Millennials found 76% of the younger generation had made compromises to secure affordable housing.

"These findings underscore the urgency to make housing affordability solutions a priority in America, especially for those most vulnerable," said Ali Solis, President and CEO of MakeRoom, a national renter's advocacy group.

As you might expect, there are geographical differences in the level of housing worries. There is less concern in the Midwest, where real estate prices are lower. There's more concern in the South, where incomes are lower, and in the Northeast, where real estate is more expensive.

It's only natural that people approaching retirement worry a little about whether they'll be able to get by without a paycheck. Maybe people with a few million socked away don't think about it much, but the rest of us worry.

A survey by American Funds – part of Capital Group – finds members of Generation X are increasingly concerned. And maybe with good reason.

After all, Baby Boomers had years of savings behind them when the Great Recession hit. Many Millennials were still in school. Generation X was just approaching its prime earning years when the unemployment rate soared past 10%, almost overnight.

"After experiencing the dot-com bust, the global financial crisis and the housing collapse, as well as stagnant wage growth during their formative adult years, Gen Xers — or Generation AnXious — are wary about their financial future," said Heather Lord, senior vice president and head of strategy and innovation at Capital Group.

And of course, career disruptions have affected retirement saving. Millennials learned the Great Recession lesson pretty well, and many of its members started saving for retirement by age 25.

Even though time is beginning to run short for Generation X, financial advisers say it's never too late to start saving for retirement. A good target, says wealth management advisor Michelle Perry Higgins, is putting away 20% of your income.

Bad timing

But Generation X is a victim of bad timing. Not only did the Great Recession hit it in mid career, there were big changes taking place in employer-based retirement systems just as Generation X was entering the workforce.

A 2014 study by the TransAmerica Center for Retirement Studies calls Generation X the “401(k) generation.” It entered the workforce along with the introduction of 401(k) plans and the decline of defined benefit plans. Because the plans were new, early participants didn't get the same education and guidance that are standard practice today.

"Most [GenX members] are saving for retirement but many have not saved enough,” the report said. “Questions about the future of Social Security loom for them. The first Gen Xers will start becoming eligible for full benefits at age 67 in the year 2032, just one year before the Social Security Trust Fund’s forecast depletion.”

Working past 65

The report found that 54% of Generation X employees expect to still be working at age 65 and beyond, and increasingly that is becoming an idea embraced by Baby Boomers as well.

In an interview with Yahoo Finance, New Jersey financial adviser Ann Minnium said she has several clients who are enjoying a successful retirement because of their willingness to work – not full-time, but part-time.

"The part-time income was the missing piece that completed a seemingly unsolvable puzzle," she said.

And that doesn't mean you have to keep doing a job you hate. Instead, it allows you to do something you enjoy, which might not seem much like work at all.

When Democrat Hillary Clinton and Republican Donald Trump squared off in Monday night's first presidential debate, there was no shortage of fireworks.

But while the 90 minutes was long on entertainment value, some commentators observed that it was short on substance. In particular, AARP Senior Vice President John Hishta said there was one issue, affecting just about everyone in the country, that was not raised.

"In this issueless campaign, the debate was the best chance for voters to get real answers on how the presidential candidates would keep Social Security strong for future generations,” Hishta said. “If our leaders don't commit to act, future retirees could lose up to $10,000 per year.”

Hishta says Social Security faces a big revenue shortfall in the future. Under current law, if nothing is done, there will be cuts across the board for Social Security in 2034.

If the political climate does not change, it's hard to see how anything gets done. Congress can simply let the cuts go into effect and individual members don't have to take any action that would be unpopular among one constituency or another.

Trying to raise the issue

For its part, AARP is trying to get the issue on the political radar screen. In spite of recent polling, which shows support for more focus on the issue, AARP complains that Social Security has been largely ignored in the election.

It points to an AARP survey of Baby Boomer women that found 71% want the government to address Social Security immediately and more than two-thirds say have heard nothing about the candidates' plans.

"Americans who are working hard and paying into Social Security were the real losers at tonight's debate," Hishta said.

Hishta said AARP will step up pressure to have moderators in the remaining two debates at least bring up the issue.

Both presidential candidates have, in fact, addressed Social Security on their campaigns. On her website, Clinton says the biggest threat to Social Security is from Republicans. She supports an expansion of benefits, to be paid for by increasing contributions from upper income recipients.

Trump has said in speeches that he does not support any cuts to Social Security or Medicare. In a statement to AARP, Trump said the best way to preserve those benefits is to grow the economy.

There are several take-aways from the latest Transamerica Center for Retirement Study (TCRS), including the fact that Baby Boomer workers aren't going anywhere.

If you're a Gen-Xer waiting for your Baby Boomer boss to retire so you can move up, you might have a long wait.

“Baby Boomers are the generation that has re-written societal rules at every stage of their life,” said Catherine Collinson, president of TCRS. “Now, Baby Boomer workers are redefining retirement by planning to work until an older age than [the] previous two generations.”

Collinson cites numbers which show that 66% of Boomers are either already working past age 65, or plan to. And it's not entirely because their work is their life. Most who plan to keep working indefinitely say they need the income or the health benefits.

Counting on Social Security

Many Boomers – 34% in fact – are counting on Social Security to be their primary source of income once they do retire – hence the large number who plan to keep working. Eighty-seven percent expect Social Security to at least be a part of their income once they stop working.

But at this point, Boomers may be better off financially than the two younger generations in the work force. One-third say they expect to get income from a traditional pension plan while 78% say they have retirement accounts they can draw on. Even so, there are still plenty of Boomers who haven't saved enough for a comfortable retirement.

Collinson says she is actually encouraged by Boomers' plans to keep working, calling it a common sense solution. That said, she encourages older workers to be proactive about staying employable and keeping current with industry standards and technology. They should also understand that the decision to work or not may not be up to them in all cases.

Better have a Plan B

“As part of their retirement planning, Baby Boomers should create a Plan B if retirement happens unexpectedly due to job loss, health issues, or other intervening circumstances,” she advises.

It could turn out that Gex X takes a similar approach to retirement when the future rolls around. The study has found that, while Gex X workers started saving for retirement around age 28, many have already taken loans or early withdrawals to pay debts or meet unexpected expenses.

The estimated median household retirement savings for Gen X employees is $69,000, a little over half the total for Boomers. Just 12% of Gen X workers said they are very confident they will be able to enjoy a comfortable retirement.

About a year ago, a survey showed that U.S. consumers were becoming less inclined to save for retirement because they didn’t want to sacrifice their current quality of life. While they considered tools like a 401(k) plan to be integral towards future security, many just weren’t willing to commit to it.

Now, a new study conducted by Bankrate.com shows a reversing trend; it says that more American workers are saving for retirement. Experts say that this could be a positive sign for a growing economy.

“More working Americans are saving more for retirement and fewer aren’t saving at all,” said Greg McBride, Bankrate.com’s Chief Financial Analyst. “Both readings are indicative of an improving economy, where people are earning more and saving more.”

Gen Xers and Millennials lead the way

The results of the study show that 21% of working Americans are now saving more for retirement than they were a year ago, the strongest improvement in five years. Additionally, fewer people are completely forgoing the saving process; only 5% of survey respondents admitted that they hadn’t saved anything this year or last year, the lowest result in the history of the study.

So which generations are leading the way in this new financially-conscious movement? Experts say that consumers belonging to Generation X (age 34-54) are saving the most, followed by Millennials (age 18-25). Members of the Silent Generation (age 71+) are saving the least, followed by younger Baby Boomers (ae 52-61).

McBride says that members of the Silent Generation may be less inclined to save because they are reaching the phase of life where they will be entering retirement; however, not saving can still be very problematic for this group and Baby Boomers.

“Younger Baby Boomers saving less for retirement than last year is troubling because they’re more likely in their peak earning years and should be utilizing higher catch-up contribution limits to get on track for retirement. Those in the Silent Generation that are saving less may be a function of earning less as they phase into retirement,” he said. 

Increasingly, retirees are not moving out of their homes once their working days are behind them. But for those who do plan to relocate, what are the most retirement-friendly cities, and which should be avoided?

Personal finance site WalletHub looked at that question and came up with a list of the best and worst cities for retirement, based on a set of important criteria. The criteria included the cost of living, but also the percentage of the population over age 65.

Measured against 31 key metrics, the analysts picked Orlando as the top city for retirement. It was number seven in affordability, number six in activities for seniors, and eleventh in health care. Its biggest drawback was “quality of life,” where it comes in at 73 out of 150.

Not surprisingly, the top four retirement destinations are in the sunny south. Tampa is second, largely by virtue of its affordability. Scottsdale, Ariz., is third – not so much because of its affordability but for its quality of life. Miami is fourth by virtue of its ranking of second in the activities category.

Surprising Sioux Falls

The real surprise might be number five – Sioux Falls, S.D. --  where it can get pretty chilly during the winter. Sioux Falls earns its ranking by being rated number one when it comes to health care.

Las Vegas, Coral Gables, Fla., Atlanta, Minneapolis, and Los Angeles round out the top 10.

At the bottom of the list of places to retire is Providence, R.I. It's one of the least affordable spots on the list – 145 out of 150 – and third from the bottom when it comes to health care. Worcester, Mass., Newark, N.J., and Chula Vista, Calif., are also cities to avoid in retirement, according to the report.

What's important to you?

Of course, different criteria are more important to some people than others. For example, great health care might trump activities and affordability might be more important than quality of life.

If affordability is most important, you might take a look at Laredo, Tex., which has the lowest adjusted cost of living on the list. Brownsville, Tex., Jackson, Miss., and Memphis are also very affordable cities.

If you plan to get a part time job in retirement, Anchorage, Alaska has the highest percentage of people 65 and over in the workforce. Want someplace a little warmer? Plano, Tex., just outside Dallas, is second in that category.

If stretching your budget in retirement is a top priority, check out these destinations where your money will go farther.

Millennials and Gen-Xers take note: your anticipated Social Security payments when you retire might be significantly less than you think.

AARP New York has released an analysis of the Social Security Trustees' annual report and concluded that millions of workers – 10.4 million in New York alone – will see their benefits cut by 25% unless Congress and the President take action to prevent it.

Fewer current retirees would be affected since the cuts would not take place until 2034. But AARP New York says younger workers need to understand the stakes. This is not a hypothetical situation – the cuts are mandated by law.

Out of money in 2034

Here's why: when the Social Security Trust Fund is exhausted – currently projected for 2034 – automatic, across the board cuts in benefits take effect. The only way to prevent that from happening is for Congress to extend the life of the Trust Fund. It could do that by slowly reducing benefits now or by increasing the amount of Social Security and Medicare taxes that are collected.

In its analysis, AARP New York estimates the average retiree household in New York would see its income go down by $4,200 a year. An additional 197,800 seniors would fall below the poverty line, an increase of 63%.

To put it in perspective, the report's authors note that New Yorkers spend an average of $6,900 a year on groceries and $4,700 a year on utility bills. Losing $4,200 a year in income, they say, will have a major impact.

Putting it on the front burner

Beth Finkel, State Director of AARP in New York, says the current election cycle is an ideal time to address this issue.

"Voters deserve to know how the candidates' plans will affect families, what those plans will cost and how they'll get it done,” Finkel said.

The situation is actually worse than it seems. The Social Security Trust Fund shows a surplus on its books, but there is no money – it's made up of IOUs Congress has written since 1983, when it raised the Social Security withholding tax to build up a surplus – but spent the money on other things.

Now, Social Security payments are being made out of the government's general operating budget with no “surplus” to offset them.

Finkel says Congress and the President need to figure out now what is going to happen in 2034.

"Doing nothing is not an option,” she said.” The question is how long will our leaders wait to act. The presidential candidates need to show they can lead on this issue and give voters real answers on how they will update Social Security for future generations."

It's easy to put off saving for retirement since there are so many other day-to-day expenses competing for your money. But starting with just small regular savings will put you on the road to a more secure retirement.

While there is no rule saying you have to save in a designated retirement account, there are advantages to doing so. And setting up an individual retirement account (IRA) is just as easy as opening any other financial account.

Most banks offer IRAs and so do investment firms. So the first decision is where you want to keep your money and what kind of investments you want in your retirement portfolio.

The second decision is choosing what kind of IRA – traditional or Roth. Vanguard has a handy comparison guide that can help you decide. Here are the major points:

Tax deductions

Contributions to a traditional IRA are tax deductible, but contributions to a Roth IRA are not. However, the decision might not be as simple as it sounds.

When IRAs were authorized, it was assumed that consumers needed tax deductions while they were young and in their peak earning years. So contributions to a traditional IRA are deductible and there is no tax on the money's growth, as long as it stays in the account.

But at age 70 and one-half, you must begin withdrawing the money and paying taxes on it as ordinary income. If you are in a lower tax bracket during retirement, maybe you will come out ahead. But many Baby Boomers are finding they are quite wealthy in retirement, and those IRA distributions can be costly at tax time.

With a Roth IRA, you can't write off contributions but you don't pay taxes on the investments' appreciation. If you are in a higher tax bracket when you start withdrawing the money, it doesn't add to your tax bill. Many financial advisers favor the Roth for that reason.

Things that are the same

Some other things about traditional and Roth IRAs are the same. People under 50 can contribute up to $5,500 per year. People over 50 can contribute up to $6,500 per year.

With a Roth IRA, you can keep making contributions as long as you want. With a traditional IRA, you can't make additional contributions after age 70 and one-half.

Once you've decided whether to go traditional or Roth – and you should probably discuss it with a financial adviser before deciding – you need to determine where the account will reside. Just because you open it at one financial institution, it doesn't mean it has to stay there. You can “roll over” one account into another IRA without penalty, as long as you follow the rules.

To open an account, it's simply a matter of filing out the proper forms and making the initial deposit. After that, you need to decide what type of investments make the most sense for your future. You can invest in stocks and bonds, as well as real estate and gold. There are a wide range of options, so it makes sense to get good advice as you start your retirement savings plan.

Much of the discussion of retirement revolves around how much money you need to save for a successful retirement.

That number, of course, is different for everyone for a variety of reasons. One of the overriding factors is the cost of living where you happen to live. In some areas, $50,000 a year would mean barely getting by. In others, it could be a comfortable income.

In recent years retirees have considered more than climate when thinking about relocating. To stretch dollars, they have also looked at housing costs, taxes, and the ease of getting around.

Bankrate.com reports smaller cities and suburbs rank highest among retirees as places where they retire. In its latest rankings, it picks Arlington, Va., a Washington, DC suburb as number one, followed by Franklin, Tenn., a Nashville suburb, and West Des Moines, Iowa.

But Arlington is one of the more costly housing markets in the country, suggesting  that unless you already live there, it would cost a lot to relocate there.

In fact, relative housing costs are a major consideration of whether retirees decide to move, and if so, where. Someone retiring from a major metropolitan area might sell a home and walk away with several hundred thousand dollars in cash. By moving to a low-cost housing market, he or she could purchase a comfortable home with half the cash and bank the rest.

The south and Midwest probably offer some of the most affordable housing for someone seeking to relocate in retirement. Here are five you might consider:

Fishers, Ind.

Fishers, Ind., is a suburb of Indianapolis. According to Zillow, the median home price in Fishers is $207,000.

Fishers' proximity to Indianapolis, the state capital, provides plenty of entertainment, education, and cultural amenities. The downside, of course, are those chilly Hoosier winters.

Tuscaloosa, Ala.

Tuscaloosa, Ala., is a college town, home to the University of Alabama. A charming, tranquil city, Tuscaloosa housing prices are very affordable.

According to Zillow, the median home value in Tuscaloosa is $142,900. Interestingly, Zillow reports the median price has declined 1.6% in the last year but is projected to rise nearly 4% in the coming year.

Cumberland, Md.

Cumberland, Md., is one of the cheapest housing markets in the country. According to Trulia, the median home value in Cumberland is just $65,000.

Located in the western part of Maryland, Cumberland is a small city in a picturesque spot and about three hours away from both Pittsburgh and Washington, DC.

Las Vegas, Nev.

Las Vegas was one of the hardest hit housing markets after the real estate meltdown. As a result, homes there lost much of their value.

According to Zillow, the median home price in Las Vegas is $196,000, making it affordable for someone retiring from an expensive housing market. Las Vegas, of course, offers a desert climate and doesn't lack for entertainment.

Pensacola, Fla.

Pensacola lies in the Florida Panhandle and is often overlooked by retirees who head farther south. It offers white sandy beaches on the Gulf of Mexico and has a metro population of less than half a million.

According to Zillow, the median home value in the Pensacola metro is $119,600. Because it's a tourist destination, there are always plenty of activities and amenities.

There is a lot of worry among financial planners about Americans' lack of retirement saving.

The advice is usually straightforward: take advantage of tax-deferred savings accounts, especially if your employer will contribute to it.

No one is suggesting you shouldn't be socking money away for retirement, but writing in Kiplinger, Michael Reese, with Centennial Wealth Advisory, makes a case against deferring taxes on retirement savings.

With a traditional IRA or employer-sponsored 401(k) account, contributions to the account are tax deductible. So are any capital gains or income the account produces.

However, at age 70 and a half, the account holder must begin withdrawing the funds and paying taxes on the money as ordinary income. If the account holder dies before the funds are withdrawn, his or her heirs must withdraw all the money and pay taxes on it.

Pay now, not later

Reese argues savers would be better off socking the money away in a regular investment account, forgoing any tax deduction and then paying taxes on any gains or income at the end of each year.

“Think about it this way,” he writes. “Let’s say you are saving $18,000 per year in your 401(k) or 403(b). You are deferring income tax on $18,000 each year you deposit the money. But when you retire, you may have built up an account worth $1 or $2 million. That is $1 or $2 million that has never been taxed! And you, or your heirs, will pay tax on every penny of it.”

Reece says you might have avoided paying some tax on the seed, but you will owe quite a bit on the harvest.

Conventional wisdom

The conventional thinking about tax deferred retirement accounts stems from the idea that people will be in a higher tax bracket during their working years and in a lower bracket during retirement, so the tax bite won't be as big when they withdraw the funds.

Reece says that isn't usually the case. Retirees have not lowered their living standard after their working years, and if they've saved and invested wisely, they haven't lowered their income.

If your employer will contribute to your IRA, Reece says you should take advantage of it, but only contribute the minimum. Don't make it your primary source of retirement savings.

A Roth IRA might be an attractive option. Contributions are not tax deductible, so withdrawals aren't taxed.

The important thing is that you are putting money away for retirement. How you do it is something you should discuss with your accountant or financial adviser.

If you hate your job, no doubt you're looking forward to retirement. But plenty of people like what they do.

That fact, a longer life expectancy, and a need to earn income longer is leading roughly one out of four of U.S. employees to say they don't expect to retire until they are 70 years old. The difference is, some are happy about it – others aren't.

The Global Benefits Attitudes Survey of nearly 5,100 U.S. employees, conducted by the firm Willis Towers Watson, found another 5% of employees don't ever expect to retire. Even a large number of those who expect to retire at 65 say there's a 50-50 chance they'll still be working by age 70.

“Although their financial situation has improved over the past few years, many workers remain worried about their long-term financial stability,” said Steven Nyce, a senior economist at Willis Towers Watson.

Not doing it because they want to

Nyce says he thinks most of those who plan to work longer aren't doing so voluntarily. He chalks it up to inadequate savings or higher-than-expected expenses later in life. He also says a surprising number of employees are counting on their employers helping by providing some early retirement incentives.

People generally are living longer and are in better health, so it might not be unusual that more people expect to work until 70. But the survey shows those who plan to keep working past 65 are less healthy, more stressed, and more likely to not like their jobs.

Incentives to work longer

It may be true that a growing number of employees feel they must keep working beyond 65, but there are also plenty who are doing it voluntarily. Social Security provides an incentive to do so, paying the largest benefit to those who wait until age 70 to begin drawing it.

In recent years, financial planners have made a point of advising people to wait as long as possible before tapping into benefits, pointing out that waiting until age 70 would increase benefits 32% than at age 66.

And they appear to be doing it. The survey found that, over the last two decades, the percentage of men in the U.S. who are working past age 65 has grown from 15% to 22%.

There is an assumption among parents that once the children leave home, they'll have a few years to sock money away for retirement. If they haven't saved enough early on, they can make up for it later.

A new report from the Boston College Center for Retirement suggests that isn't happening, at least not to the extent many retirement planners have assumed. The report finds parents haven't cut back that much on their spending and, as a result, aren't saving a lot more for retirement.

The authors begin with the assumption that when children leave the household, parents have more disposable income. What they do with this money is important for two reasons, they argue.

If parents save the extra money, they not only build up their retirement savings, they also keep their standard of living in check, meaning they will need less money to support it during retirement.

However, if they spend the money, they not only reduce the amount of money available at retirement, they have increased the standard of living they will need to support during retirement.

Just a slight increase in savings

“The results in this brief suggest that when the kids leave, households do increase their saving through their 401(k)s, but just slightly,” the authors write. The size of the increase is more consistent with research that suggests roughly half of households do not have enough savings for retirement than with the optimal savings research.”

The report does not speculate on how parents spend their money. It does note, however, that other research has shown that parents often provide financial assistance to their children, even after they leave home.

This was often the case in the years immediately following the financial crisis, when unemployment was high and wage increases were non-existent.

Last year the Pew Research Center issued a report that found 61% of seniors had provided financial support to an adult child in the previous 12 months.

Ameriprise, a financial services firm, issued research showing that 23% of Americans said their retirement planning had been disrupted by the financial help they were providing their offspring.

Americans are living longer. That's the good news.

The bad news is, longer life could mean you live your last years in poverty, if you end up outliving your money.

As you might expect, this is a growing fear among the aging population. Northwestern Mutual has released its 2016 Planning & Progress Study, showing two thirds of Americans think there is some chance that they will outlive their savings.

Drilling down in the numbers, the survey found that just over one third believe there is a better than 50% chance of that happening. Notably, 14% are convinced that will be their fate.

Despite this prevailing belief, the survey found that Americans aren't doing much about it. Just 21% reported increasing their savings while more than four in 10 say they have taken no steps at all.

Social Security skepticism

Not only are Americans doubtful about their ability to save enough for retirement, they also express strong doubts about the government's minimal safety net – Social Security. Just 25% of those polled are very confident that Social Security will be there when they retire.

About 28%, in fact, mentioned uncertainty about Social Security as one of the main obstacles to having a financially secure retirement.

The survey found just 35% of Americans who have yet to retire expect that Social Security will be the major part of their retirement income compared to 49% of current retirees.

Rebekah Barsch, vice president of planning for Northwestern Mutual, says the survey should serve as an incentive for Americans to get serious about their non-working years.

"The prospect of an extended retirement in an environment of diminishing safety nets makes it even more essential that your financial plan is flexible enough to stretch as long as needed," she said.

What to do

While money for retirement doesn't have to be contained in an account designated for that purpose, there are tax advantages to using a retirement account, like a 401(k) offered through your employer or an Individual Retirement Account (IRA). The advantage is that money grows without being taxed, until it is withdrawn.

Many people don't have access to retirement plans through their employers. To address that need, the government last year introduce MYra, a basic IRA that has no fees. It carries no risk of loss but returns only a small amount of interest.

Surveys have shown the biggest impediment to retirement savings is most people think they have enough trouble just paying the bills each month. Talking to a non-profit credit counselor or financial advisor may help you establish a savings plan, even if it is a very small amount each month.

Personal finance experts say that once a savings plan is in place, it will be easier to build on it over time.

Consumers approaching retirement are no doubt confused at all the conflicting advice they receive about how much income they will need for a “comfortable” retirement.

Financial advisors generally suggest that most retirees will need at least 70% of the annual income they earned before retirement. By that metric, a new study from personal finance site Bankrate shows seniors in all but three states – Alaska, Hawaii, and South Carolina – are coming up short.

"Americans are facing a shortfall of retirement income because their saved assets are not enough to fund their desired or even current lifestyle," James Carlson, chief investment officer at Questis, a financial services firm based in Charleston, South Carolina, told Bankrate.

The study authors looked at the incomes in each state, broken down by age. The median household income in South Carolina for people age 45 to 64 is $52,289. The median income for those 65 and up is $36,694, which is just over 70% of the younger group.

The biggest shortfall is found in Massachusetts, where those 65 and older earn just 48% of what those age 45 to 64 earn.

Reasons for discrepancies

What causes the discrepancies between states? For one thing, Alaska has very generous retirement benefits for state employees who remain in the state after they retire. Hawaii, another state with a high cost of living, is generous to seniors when it comes to tax breaks. Seniors in Hawaii also tend to spend less on health care.

South Carolina has become a major retirement destination, and many of the people moving to the state have significant investment and pension income, which boosts the average.

In today's low-interest environment, savings will yield almost no income. Retirees living off savings will need to consider investments that have potential to either grow the value through capital appreciation or generate income through dividends.

Those who have a defined benefit pension are fortunate, but since pensions have been phased out over the last couple of decades, fewer workers have access to that kind of steady income.

Social Security is another defined benefit, but in most cases doesn't go far enough to be a sole source of income.

What to do

One of the best ways to generate income in retirement is by working. Someone who has worked for nearly 50 years might not want to contemplate that, but a part-time job in retirement that coincides with the retiree's interest or passions might not seem like work at all.

If you love animals, for example, you can make pretty good money, with flexible hours, as a pet sitter.

Along with adding to income, look for ways to cut expenses. Relocating to a state with a low cost of living, for example, might allow you to live on less money.  

With so many Baby Boomers reaching retirement age, living trusts have become a hot topic. Do you need one? Minnesota Attorney General Lori Swanson has some advice: be careful.

“You should steer clear of 'living trust mills,' which hold themselves out as estate planning specialists but churn out boilerplate documents for a high fee, all to get their foot in the door to sell you annuities or insurance products later on that might not be suitable for your needs,” Swanson writes on her web site.

She says people pushing living trusts are often nothing more than insurance agents, or people working for insurance agents. They may charge you a lot of money for a boilerplate trust, but their real aim, Swanson says, is to make an even bigger sale later on.

A living trust is a legitimate estate planning tool. Like a will, it is created while you are still alive. It allows you to transfer assets to the trust and, if done properly, may transfer those assets to heirs without going through probate.

According to the American Bar Association, a living trust is revocable, which makes it very flexible. You, or someone you appoint, manages the assets in the trust. Assets may be bought or sold but always remain in the name of the trust.

Complex legal document

The problem, says Swanson, is that a living trust is a complex legal document and a one-size-fits-all approach won't work very well. To set up a living trust, she suggests working with an experienced attorney.

Unfortunately, that's not how many consumers get drawn into the process. Swanson says living trust mills work by usually making initial contact by phone or by mail.

The target may be invited to a “free dinner” to hear a presentation. At the event, the “expert” scares his audience with horror stories about what will happen if you die without a living trust.

Swanson says the expert will next try to book as many in-home appointments with audience members as possible. During those visits he will collect extensive financial information about his potential client, working to earn his or her trust.

Swanson says he may eventually try to sell an over-priced living trust, but she says that isn't the real objective. Once he has a complete financial picture of his potential client, then and only then does the real pitch emerge – an annuity or insurance policy.

A lot to consider

“Annuities are complex products,” Swanson says. “If you move your money from another product, you may have to pay fees or penalties. Some long-term annuities may lock up your money for more than ten years, subjecting you to penalties if you need to access your money for living expenses.”

She says annuities may also have complicated interest-crediting provisions. That, she says, could lead to confusion about benefits.

Swanson's advice? Avoid living trust mills and, if you are considering an annuity or insurance policy, take some time to think it over and discuss it with family, friends, or an experienced investment professional you trust.

With the huge Baby Boom generation beginning to retire, you might expect the annuity business to be booming. After all, with one lump sum investment, a retiree can look forward to a steady stream of monthly income until they die.

But the annuity business isn't booming, and researchers at Boston College were called upon to try to figure out why. The researchers conclude that consumers avoid annuities for some of the same reasons they generally put retirement savings on the back burner: they associate it with death.

Don't want to go there

"People need to think about how long they expect to live in order to calculate the potential payout for an annuity," Linda Salisbury, a Boston College marketing professor and co-author of the study, said in a release. "Our goal was to understand how we can help people overcome their avoidance of annuity products."

To arrive at their conclusion, the researchers divided subjects into two groups, telling both that they were 65 years old and starting retirement. One group was told to think about putting money into an IRA and the other was told to think about putting money into an annuity.

Following the exercise, the participants were quizzed about the thoughts going through their mind. The researchers found 40% of the annuity group was thinking about death, while only 1% of the IRA group had those thoughts.

Follow up test

To further test the theory, the researchers then asked one group to write an essay about their own death and the other to write about dental pain they had experienced. Then, both groups got a sales pitch for annuities and were asked if they wanted to purchase one.

The group that had written about death was 50% less likely to show interest in an annuity.

Could the prospect of confronting one's own mortality really be the reason consumers shy away from annuities? If so, might it also explain why many Baby Boomers haven't done such a great job of planning for retirement?

Language influence

In a 2013 study, Keith Chen, of Yale University, offered another explanation. He found that cultures where there is the most saving for retirement speak languages where there is no grammatical distinction between the present and future.

“Empirically, I find that speakers of such languages save more, retire with more wealth, smoke less, practice safer sex, and are less obese,” he wrote. “This holds both across countries and within countries when comparing demographically similar native households.”

In English, he points out, the language makes a difference between the present and future. That leads, he says, to less future-oriented behavior, such as saving for retirement.

The workplace has changed since the Great Recession. Full-time jobs with generous benefits are still available, but there are far fewer than there was a decade ago.

Instead, we have begun to move into what some call the on-demand economy and others call the freelance economy. Instead of one job, an individual might have three and get paid as an independent contractor instead of an employee.

Or they might be a part-time employee for a company and have a freelance job on the side.

This arrangement can have its advantages. A freelance worker is his or her own boss, choosing when to work and what jobs to take. That's the theory, anyway.

The downside, of course, is lack of job security and a lot of other unknowns – such as retirement. When you aren't sure how much money is coming in each month, how do you plan for retirement?

Give employees more control

The R Street Institute, a Washington think tank, has studied the problem, concluding that reforms are needed to create a retirement system less tied to employers and controlled more by the employee.

“Under the current system, assets in employees’ 401(k) accounts do not actually belong to the employees,” R Street Associate Fellow Oren Litwin said in a statement emailed to ConsumerAffairs. “Instead they belong to the sponsor company – the employer – and are held in trust for the employees’ eventual benefit.”

Litwin said reforms that give employees direct control of retirement accounts would be a step in the right direction.

New social contract

A gathering of government, academic, and private sector players at MIT earlier this month also tackled issues arising from the on-demand economy, concluding it's time for a new social contract, built on the assumption that Americans will often hold down more than one job.

“How do we allow the innovation of the on-demand economy, but also recognize that we’ve got to maintain consumer protections and we’ve got to make sure that workers are treated fairly?” Sen. Mark Warner (D-VA) asked at the event.

Warner noted that when you get to choose when to work, the whole notion of unemployment insurance and vacation time “is a foreign concept.”

Jonas Prising, CEO and chairman of staffing firm ManpowerGroup, said he has seen a distinct trend in the last decade. More older people are seeking work, he says, and are having a greater say in when and where they work.

Going forward, Litwin says a typical worker is likely to have two or three retirement accounts over his or her working life. The downside to that is these accounts may be neglected, or even forgotten.

Under current law, self-employed workers may set up a simplified employee pension IRA (SEP IRA), with full control of the account. If the employee moves back and forth from employment with benefits and freelancing, his or her 401(k) with the employer may be rolled over into the SEP IRA.

Learn more about SEP IRAs here.

Investment bank Goldman Sachs is purchasingHonest Dollar, which operates retirement plans for employees of small companies that don't have an employer-sponsored retirement savings program.

The deal sheds some light on a small company that doesn't get much attention, but which may hold the potential to help solve a pressing need – encourage more workers to put money away for retirement. Currently, an estimated 45 million Americans don't have access to a retirement savings plan at work.

Honest Dollar is a web and mobile platform offering retirement plans for employees who work at small-and medium-sized businesses. There are also plans for people who are self-employed or who work as independent contractors. The system uses currently available individual retirement account (IRA)-based savings programs.

Simple solution

In a statement, Timothy J. O’Neill and Eric S. Lane, co-heads of the Investment Management Division at Goldman Sachs, said Honest Dollar has created a simple solution to a complex retirement savings problem.

“Together, we have the potential to help millions of people achieve their investing goals,” they said.

Goldman Sachs believes the Honest Dollar approach also has potential to change the retirement investment landscape. Signing up is easy. Both employers and employees can do it online in less than two minutes.

Two retirement plans

The company offers two savings plans. The Basic Plan allows employers to provide employees access to individual IRAs. Depending on qualifications, employees will be able to choose from either a traditional or Roth IRA.

Under The Basic Plan, employees make all the contributions to their own accounts. Employers do not contribute.

The Flexible Plan contains a few added benefits. It allows employers to define eligible employees for participation in an employer sponsored SEP IRA. Employer contributions are at the discretion of the employer, but all eligible employees must participate.

Portable

The accounts are fully portable. If an employee leaves a company, the account goes with him or her.

Independent contractors and self-employed can also set up retirement accounts using Honest Dollar. Depending on how you qualify, you may be able to use either a Roth IRA or SEP (self-employed pension) IRA. Naturally, you'll be responsible for making all your contributions.

Employers pay $10 per month per employee to provide access to a retirement account. Employees pay nothing, except when they withdraw funds or close their accounts.

Once upon a time the average American consumer worked at the same place for 30 or 40 years and retired with a modest pension and Social Security, enough to live out their days in relative comfort.

That was before escalating medical costs, longer lifespans, and the wholesale replacement of defined pensions with individual retirement savings plans.

A new report from the Economic Policy Institute (EPI) finds that an increasing number of Americans have saved little or nothing for retirement, and has focused on characteristics of savers.

The study found that retirement wealth more than kept pace with incomes over the past 25 years. It nearly doubled as a share of personal disposable income between 1989 and 2013, with retirement account savings exceeding pension fund assets after 2012. While that seems to be a positive, the study notes that there is a distinct disparity among those who are saving and those who are not.

Widening retirement gaps

It suggests the shift from traditional pensions to individual savings has widened retirement gaps. High-income, white, college-educated, and married workers participate in defined-benefit pensions at a higher rate than other workers, but participation gaps are much larger under defined-contribution plans.

For many groups—lower-income, black, Hispanic, non-college-educated, and unmarried Americans—the typical working-age family or individual has no savings at all in retirement accounts.

“And for those who do have savings, the median balances in retirement accounts are very low,” the authors write.

The report also finds that economic turmoil takes a toll on retirement savings. Much of the 401(k) era coincided with rising stock and housing prices that propped up family wealth measures even as the savings rate declined.

This house of cards collapsed in 2000–2001 and again in 2007–2009. By 2013 most families were still feeling the impact from the financial crisis and Great Recession, reducing, if not eliminating, their ability to save for retirement.

Younger consumers not saving

At this point, the authors believe younger generations should be stepping up their retirement savings in defined-contribution plans. But while the retirement account savings of families approaching retirement grew before the financial crisis and Great Recession, those of younger families stayed flat.

At this point, the report notes the much discussed income inequality extends to retirement savings. The rich have gotten better prepared while the poor continue to lose ground.

“Participation in retirement savings plans is highly unequal across income groups,” the authors write. “In 2013, nearly nine in 10 families in the top income fifth had retirement account savings, compared with fewer than one in 10 families in the bottom income fifth.”

The report says the disparity has grown in the last decade as the share of working-age families with retirement account savings declined for all except the top income group. It concludes that it may be normal for higher-income families to have more savings, but it is not normal for most families in the bottom half of the income distribution to have no retirement account savings at all. That, the authors say, is a serious policy failure.

If you're retiring this year, congratulations. Life will get better if you've planned well, but remember that taxes can play a huge role in your financial future during retirement.

Once you are no longer working full time and depending mostly on Social Security and retirement savings accounts, your tax situation can change. Dara Luber, senior manager of retirement at TD Ameritrade, says retirees – and those soon to be retired – need to pay closer attention to aspects of the tax law that can help or hurt.

“You need to be aware of how Obamacare and tax penalties related to the Affordable Care Act might have tax implications,” Luber told ConsumerAffairs. “You need to know whether tax brackets are changing.”

You also need to be aware of advantages that are available to older consumers, like changes to catch-up contributions. Ignoring legal changes could mean missing out on tax-favorable, last minute catch-ups to a retirement fund.

Changes at 65

When you turn 65, the way you file your taxes may change. You may be eligible for certain credits and deductions, and will be able to take a higher standard deduction, which may be more advantageous than claiming itemized deductions. Tax planning may change, especially if you are withdrawing funds from a tax-deferred retirement account.

“You may want to take into consideration things like your required minimum distribution if you are 70 and a half, you may want to take into consideration some state tax benefits in terms of your Social Security, and how that's taxed,” Luber said.

At the same time, certain credits or deductions you've enjoyed in the past may no longer apply. You may need to consider paying estimated quarterly taxes once you hit retirement.

Luber says there is no cookie cutter retirement plan, but you can take into account some fairly general assumptions by asking yourself some questions.

“Do you think taxes are going up? What do you think will happen with Social Security and Medicare? The answers can affect your tax planning,” she said.

Resources

Fortunately, there are many resources to help retirees deal with tax issues. The Internal Revenue Service (IRS) provides an extensive resource for retirement issues. TD Ameritrade also maintains a 2016 Tax Resource Center that may prove helpful.

Finally, Luber says it is important to consult with a tax professional as you transition into retirement. If you have been doing your own taxes each year, it might be wise to obtain the services of an enrolled agent—a tax professional who is licensed by the IRS, at least for the first year.

If your retirement involves a move, you may want to check with your new state's CPA society, the Accreditation Council for Accountancy and Taxation, or the National Association of Enrolled Agents.

The important thing is to make sure you are aware of all the benefits and responsibilities that come to a retired taxpayer. Retirement will likely change many of the ways you live your life, including the way you manage your finances and taxes.

“It's really a balancing act, trying to figure out how you limit your taxes and keep more in savings and still have enough to live on in retirement,” Luber said.

AARP, formerly known as the American Association of Retired Persons, and Young Invincibles recently hosted an event called "Cheers to Your Future: A Happy Hour on Millennials’ Economic Outlook" in support of “Secure Choice” -- a legislation that would give working New Yorkers of every age the option to save at work via payroll deduction.

The legislation could be a positive step towards helping Millennials save for retirement. Compared to earlier generations, Millennials haven’t had it so easy when it comes to saving for retirement; a nationwide survey showed that Millennials have less wealth overall than earlier generations, and over half of low-income Millennials lack access to workplace retirement savings programs.

Savings plans like Secure Choice can go a long way towards helping an individual become self-reliant in retirement. But what other steps might a young person take to help them prepare for retirement?

To answer this question, we spoke with Michelle Perry Higgins, Principle and financial planner at California Financial Advisors, San Ramon, Calif. She advises young people to learn to balance the funds coming in so they don’t go out too quickly.

Visualize buckets

“You might be in awe of your paycheck and ecstatic to have money coming in regularly,” says Higgins, “But be smart with your money.”

She recommends visualizing various buckets: one for retirement, one for emergency reserves, one to pay down debt, and one for day-to-day expenses (yes, including some fun!). Keeping these buckets full can help ensure funds stay balanced -- which may also help you resist the urge to splurge while out shopping.

“Remember,” says Higgins, “Budgets are sexy. Budgets are cool. Budgets breed confidence and self-respect.” Buying a new pair of shoes may produce momentary happiness, but your self-respect will be shot if you can’t make rent because you splurged on the shoes.

20% for retirement

Higgins also recommends saving 20% of your income for retirement. Even though retirement may feel like a million years away, it’s a mistake to think, “I just graduated. I’ve got plenty of time,” says Higgins.

“Be savvier than that,” she says. "Once you get in the habit of saving 20% of your income for retirement, you’ll never miss the money."

You can also check and see if your employer offers a retirement plan (some will even match a percentage of your contribution). It’s a painless way to save, says Higgins, because the money is deducted directly from your paycheck.

Once a year, Higgins recommends checking in with a fee-based financial planner. With clear goals in place, you’ll never question your financial position.

More money-saving tips for young people can be found in her book, "College Poor No More! 100 $avings Tips for College Students."

Stock market volatility since the beginning of the year has investors puzzled and people saving for retirement nervous.

The latter tend to put their money in stock mutual funds, which have seen sharp erosions so far in 2016. Many are asking what their next step should be.

The advice that's emerging from market watchers tends to break down into two camps – stay the course and take defensive measures now and be careful about adding to positions.

Vanguard founder Jack Bogle clearly represents the stay the course view. In an interview on CNBC this week, the mutual fund guru called the current market volatility “speculation,” and said consumers should continue investing because the underlying economy is fine.

"In the short run, listen to the economy; don't listen to the stock market," he told interviewers on Power Lunch. "These moves in the market are like a tale told by an idiot: full of sound and fury, signaling nothing."

Continued headwinds

Michelle Perry Higgins, Principal at California Financial Advisors in San Ramon, Calif., is also counseling clients to hold tight, even though she acknowledges the market is likely to face strong headwinds from oil and China throughout 2016.

“My clients’ portfolios have strong defensive barriers that include bonds and cash for short term needs,” she told ConsumerAffairs. “Therefore, there is no need to sell equities in a panic.”

As for people sitting on large amounts of cash, she suggests the current market swoon represents an opportunity to put that money to work.

Farther to fall?

But others are not so sure stocks don't have farther to fall. Ari Wald of Oppenheimer is a technician who bases market calls on a reading of the charts. He tells CNBC that he believes stocks are in what he calls a non-recessionary bear market and they have not quite reached a bottom. He predicts the S&P 500 still has another 130 points or so lower to go.

Brett Arends, a columnist for Marketwatch, also sees more potential downside, writing that the market is cheaper, but not yet cheap. He maintains the underlying value of companies in the S&P 500 still don't justify their prices, even after this month's declines.

“None of this means the current slump must get worse anytime soon,” he writes. “The only short-term cause of a market selloff is the same: more sellers than buyers. At some point more buyers appear, while some sellers pause for breath.”

He says Wednesday's partial recovery from a terrifying morning plunge is a “hopeful sign.” Still, he says it might be a little too early to go bargain hunting.

You've finally made the decision to call it a career. But what will you do about that pension that's been building for the last umpteen years?

Fear not. The Consumer Financial Protection Bureau (CFPB) has put out a guide to help you decide which pension payout option is best for you and make the right decision about retirement income.

The guide gives folks on the cusp of retiring the information they need to understand the trade-offs of taking their pension in a monthly payment or in a lump sum. There are also tips and warnings about how to protect and best manage that money.

“Retirees are increasingly being faced with the difficult one-time choice to either take their pension payments in a lump sum or as a lifetime income stream,” said CFPB Director Richard Cordray. “Clear information about the trade-offs they face can help consumers make the right financial decision for their retirement security.”

Your pension plan

Many employees in the private sector are covered by defined benefit pension plans in which retirement benefits are typically based on years of service and earnings, and paid out in the form of lifetime monthly payments.

Increasingly, employers are giving consumers eligible for retirement benefits the option of a one-time payment for all or a portion of their pension, commonly known as a lump-sum payout. In a given year, thousands of retiring consumers face this decision.

According to a government report, many people considering retirement don't get enough information from their employers about the long-term financial impact of choosing between a lump sum or an annuity pension payout or where to find help.

Making the decision

The consumer guide highlights factors that would-be retirees should consider:

• Length of time income is needed: The monthly payment option offers steady lifetime income, which substantially reduces a consumer’s risk of running out of money later in life. A lump-sum payout, however, might make sense if the consumer is terminally ill or in critically poor health, or the consumer already has sufficient income to cover basic living expenses.
• Money management skills: When a consumer chooses a lump-sum pension payout instead of monthly payments, the responsibility for managing the money shifts from the employer to the employee. For a monthly payment option, consumers don’t need to worry about their investment skills or how their financial management skills may change as they age. In contrast, a lump-sum payout can give a consumer the flexibility of choosing to pay off large debts, where to invest or save the money, and when and how much to withdraw.
• Another factor to consider is that a consumer’s pension is typically insured by the Pension Benefit Guaranty Corporation (PBGC). In the event the retiree’s company declares bankruptcy or cannot make its pension payments, the PBGC guarantees those payments up to a certain amount. Pension payments are also protected against certain creditor claims or debt collectors. With a lump-sum payout, you lose these protections.

Pension payout tips

To assist retirees who plan to make the one-time choice for a lump-sum pension payout, here are some key tips to consider:

• Check for lump-sum calculation errors: Many factors determine a lump-sum payment amount, including age, years of work, earnings history, taxes withheld, and the terms of the plan. Consumers can detect errors by taking a look at their most recent pension statement or a consumer can contact a pension counselor for assistance or to resolve errors.
• Plan for tax consequences: Consumers will pay taxes on a lump-sum payout. This money is generally treated as ordinary income for that year. For this reason, an employer is required to withhold 20% on the amount. In addition, a consumer could pay a 10% early withdrawal penalty tax if he/she has not reached age 59½. Consumers can defer income taxes on their lump sum by rolling over the funds into a qualified retirement account.
• Consider future needs of surviving spouse: If married, consumers should consider the long-term financial well-being of their spouse. A family history of longevity and good health may mean the possibility of spending 20 or more years in retirement. Most pension plans provide monthly benefits to a surviving spouse or another beneficiary after the pension holder’s death through a joint and survivor payout option.
• Protect the lump sum from fraudsters: Older people are often targets of scammers and fraudsters. Consumers should verify information, ask questions, and seek advice from trusted professionals if they are offered high returns and low risk to invest their lump sum.

More information for older Americans about making financial decisions, protecting assets, preventing financial exploitation, and planning for long-term financial security can be found at consumerfinance.gov/older-americans/.

This is the time of year for New Years resolutions, which typically have to do with health and fitness. But financial advisors say consumers shouldn't overlook their financial fitness, especially when it comes to retirement planning.

Experts at Foresters Financialsay a recent survey shows 70% of American workers believe financial stress is the most common cause of stress and are interested in ways to avoid it. Forester says there are many simple things consumers can do to improve fiscal fitness, such as saving more and spending less.

Easier said than done, right. After all, the bills keep coming and pay raises haven't been all that plentiful.

Pay yourself first

But one strategy to get ahead is setting aside a specific amount of money each month to pay yourself first, before you start paying your bills.

"There are many excellent strategies to improve your overall financial wellness," said Paul Prete, Vice President, for Retirement Programs at Foresters Financial. "To ensure thoroughness, one of the best strategies is to work with a financial representative who can help you achieve your financial goals based on your specific situation, risk tolerance and time frame—whether it be for making investments, retirement planning, funding a college education or providing life insurance protection for you and your family."

Prete says the key is to get empowered. You do that by taking an involved approach. Don't just leave it up to your advisor. Read the research and learn about investments. The important thing, he says, is to get active – just like you would do if you were trying to improve your physical health.

This advice may be especially timely for older Americans. Last year the General Accountability Office (GAO) issued a report showing a disturbing number of Americans are approaching their retirement years with no savings and few, if any, assets.

Their future may then depend on whatever income they can derive from continued employment and the increasingly fragile lifeline provided by Social Security.

52% have no savings

In a report produced as the request of Sen. Bernie Sanders (I-VT), now a candidate for the Democratic Presidential nomination, the GAO found that 52% of U.S. households age 55 and older have no retirement savings, such as in a 401(k) plan or an IRA.

Worse still, the agency found many older households without retirement savings have few other resources, such as a defined benefit pension, non-retirement savings, or other assets.

In November, the U.S. Treasury Department introduced a simple savings vehicle called myRA, after testing it with a small group of people.

The idea is indeed simple. Consumers can put a small amount of money away on a regular basis – whether it's taken from their paycheck or it comes directly out of a bank account.

It was designed for the millions of people who don't have access to employer–sponsored retirement accounts and those who have found it difficult to save anything.

For more information about MyRA, click here.

As we reported back in June, research shows half of older Americans have no retirement savings.

Other research documents the difficulty young consumers face in putting money away for their retirement years.

To help people get started on a path to saving for retirement, the U.S. Treasury Department has rolled out a simple savings vehicle called myRA, after testing it with a small group of people.

The idea is indeed simple. Consumers can put a small amount of money away on a regular basis – whether it's taken from their paycheck or it comes directly out of a bank account.

It was designed for the millions of people who don't have access to employer–sponsored retirement accounts and those who have found it difficult to save anything.

Removes barriers

“myRA is designed to remove common barriers to saving, and give people an easy way to get started,” said Treasury Secretary Jack Lew. “myRA has no fees, no risk of losing money and no minimum balance or contribution requirements. To make saving easier than ever, you can now put savings into my myRA directly from your bank account.”

Because myRA carries no risk, it also carries very little upside potential. Money is invested in very conservative vehicles that provide very little growth. But for people who are risk averse and new to saving, it might be a good first step.

“myRA can give people confidence that they’re taking steps in the right direction, and it can serve as a bridge to other savings options that will carry them the rest of the way,” said Lew. “myRA alone will not solve the nation’s retirement savings gap, but it will be an important stepping stone for encouraging and creating a nation of savers.”

$15,000 limit

In fact, myRA is meant to be a “starter” savings program. When the account reaches a total of $15,000, it must be rolled over into a traditional retirement savings plan.

The new myRA accounts work like a Roth IRA. The money that is invested can't be deducted from income taxes but neither is the money taxed when it is withdrawn. Earnings – meager though they may be – are not subject to tax.

To participate in myRA, savers or their spouses must have taxable income and follow established Roth IRA rules. Savers can put away as little as a few dollars, up to $5,500 per year – or $6,500 per year for individuals who will be 50 years of age or older at the end of the year.

Participants can also withdraw money they put into their myRA accounts tax-free and without penalty at any time, although Roth IRA requirements apply to the tax free withdrawal of any earnings.

Consumers can get information about myRA and sign up for an account at myRA.gov.

Social Security is the most popular government program in U.S. history. Enacted during the New Deal, it provides income in retirement for every U.S. citizen.

But despite its popularity, most consumers – especially those not yet receiving it – know very little about it. In fact, we don't even think we know much about it.

When AARP posed the question in a survey, only 9% of consumers said they believe they are very knowledgeable about how Social Security benefits are determined and just 1% of Certified Financial Planner professionals say their clients are very knowledgeable about the ins and outs of the program.

What emerges is a rather large knowledge gap consumers face as they determine how to claim Social Security benefits.

“For families and individuals looking to claim their Social Security benefits soon, this survey shows that far too many face a claiming knowledge gap potentially leaving thousands of dollars on the table,” said AARP President Jeannine English. “We hope that this survey encourages Americans to begin their long term financial planning as soon as possible.”

No surprise

Jonathan Becker, financial planning executive with California Financial Advisors, in San Ramon, Calif., says it would be surprising if most people were able to understand the highly complicated Social Security rules. He finds that knowledge is spotty.

“For example, quite a few people are aware of the rule that reduces Social Security benefits if they have earned income over a certain amount until they reach Full Retirement Age,” Becker told ConsumerAffairs. “However, they are likely not aware of how the reduction actually works, the fact that foregone benefits are credited for later use and thus not lost, or how the rules apply to the partial year before the date Full Retirement Age is reached.”

While statistics show that, for far too many consumers, Social Security makes up the bulk of their retirement income, consumers appear to believe they will rely less on it when they stop working.

Fewer than four in ten consumers believe Social Security will make up at least half of their income. However, AARP research shows that as Americans age, their reliance on Social Security tends to increase significantly. Nearly six in ten Americans rely on Social Security for at least half of their retirement income after they reach 80 years of age.

Important points

What do future retirees need to know?

“People need to consider the non-quantitative factors that impact the decision of when to take Social Security,” Becker said. “These include such variables as health, how long they can or are willing to work, the possibility that future benefits may be affected by U.S. fiscal considerations, and how they will make up income if they retire early but want to wait until later to take benefits.”

But the survey found that 83% of consumers overestimated or underestimated the amount of money they would receive if they waited to become beneficiaries at their full retirement age.

About 39% did not know that age 62 is the earliest you can claim benefits, though most advisors say you should wait, in order to maximize benefits. In fact, 18% of financial professionals interviewed in the survey recommended waiting until age 70 to claim benefits, yet only 13% of consumers planned to take that advice.

Every working person occasionally (or maybe not so occasionally) dreams of the day when they can stop working and go into retirement. In order to be comfortable when you reach that point in your life, though, you should be continuously putting money into your retirement savings and not touching it. This last part, unfortunately, seems to be a problem for many Americans.

A recent report by Bankrate.com shows that nearly 30 million people took money out of their retirement savings this past year due to an emergency. Another 21 million people simply aren’t putting money towards retirement at all, which could prove costly when they reach an appropriate age.

Disparity between generations

In their report, Bankrate.com determined that millennials were the best at putting money towards retirement and not touching it; only 8% of people in this age bracket took money out of their savings prematurely in the past year. This may correlate to how they feel about their overall financial situation – 40% say they are better off financially than they were a year ago, while only 11% say they are worse off.

In contrast to millennials, people ranging in age from 50-64 are much more likely to think that their financial situation has worsened in the last year. The report shows that 26% of people in this age bracket admit to these feelings – the most of any other age group surveyed. Seventeen percent of people in this age group also admit that they have dipped into their retirement savings this past year to pay for an emergency.

“Using retirement savings to cover an emergency is a permanent setback to retirement planning, with the possibility of taxable distributions, early withdrawal penalties, loss of tax efficiency, and the inability to replace withdrawn funds in future years,” said Bankrate.com’s chief financial analyst, Greg McBride.

The site’s full survey can be viewed here. 

Charles Schwab commissioned a survey of consumers to gauge how they were saving and, if their saving fell short, the reasons for it.

The survey found that most workers need no convincing that the 401(k) is a key tool to build retirement income. But it appears people do need convincing to put money into these tax-deferred retirement accounts. A “live for today” mentality appears to be the biggest obstacle.

More than one-third – 35% – say they aren’t saving more for tomorrow because they are unwilling to sacrifice their quality of life today. They say they don't want to cut back on expenditures like dinners out and vacations.

Dealing with everyday life can be another obstacle. Thirty-one percent say paying for unexpected expenses and covering basic monthly bills is an impediment to putting money away. Twenty-four percent say credit card debt takes their extra money each month.

Indispensable tool

Even so, the survey found that most workers think a 401(k) is an indispensable tool.

“When it comes to retirement, there’s been a significant shift of responsibility from employer to employee over the past 30 years, making the 401(k) plan a critical part of the retirement system,” said Steve Anderson, head of Schwab Retirement Plan Services. “Our survey found only one in five participants would be confident in their ability to save for retirement without a 401(k) plan. In fact, participants worry as much about having enough money to enjoy retirement as they do about being healthy enough to enjoy retirement.”

Since most 401(k) plans are self-directed accounts, some basic knowledge of finance is necessary. However, it could be lacking. While 90% of workers in the survey knew what an ideal credit score is, only 58% knew how much they needed to save for a comfortable retirement.

Health insurance material is more clear

Nearly half said materials explaining their 401(k) plan investments are more confusing than materials explaining their health & medical benefits. Nearly 30% said they have reduced or made no change in the money flow into their retirement account in the last two years.

Anderson says many employers recently tweaked their 401(k) plans to encourage more participation. They are using automatic enrollment, automatic savings rate increases, and automatic investment advice to help their employees prepare for retirement.

“The industry needs to focus more on plan design features like these if we are to further our goal of improving participant outcomes,” Anderson said.

Employer match is key

Stock picking guru Jim Cramer, host of CNBC's Mad Money, has famously criticized 401(k)s for their high management fees and limited investment choices that give savers little control. However, he says if an employer matches the employee's contribution, they can be good retirement vehicles.

Most employees appear to have embraced the 401(k). The Schwab survey found 60% said the 401(k) is their only or largest source of retirement savings.

Most of the time the debate over whether to buy or rent a home takes place among Millennials.

The younger generation was slow to embrace homeownership in the wake of the housing bust, though recent evidence suggests they are now showing a lot more interest.

Rarely do you hear people approaching retirement debating whether or not they should buy a home when they downsize and relocate. But Jane Bryant Clark, senior editor at Kiplinger's Personal Finance, says it's a discussion that more retirees ought to be having.

She writes that she was planning to sell her home when she retires and buy a condo. She found what she thought was the perfect unit – it had everything she was looking for. There was just one problem – it wasn't a condo, it was an apartment.

Financial advisors weigh in

Should she rent instead of own? She posed the question to a number of financial advisors she consults on a regular basis.

“I was actually surprised at how many were receptive to the idea of renting,” Clark told ConsumerAffairs. “Most of them seem to think there are some very good arguments for it. Renting is more flexible, expenses are more predictable. They seemed to think it was a good option, actually.”

It's flexible because you normally sign a one-year lease. No matter how long you stay, when you leave it's a lot easier because you aren't listing a property for sale. You just move.

Clark says financial advisors worry about their clients who retire and embrace big changes, like moving from the suburbs to the city, or moving to an entirely different part of the country.

“That's a big lifestyle change and its possible you just wouldn't like it,” Clark said. “Many of the financial advisors I talked to about this think it's not a bad idea to rent for a while after retirement, just to see.”

The economic argument

Besides whether or not you're happy in your first move in retirement, there's the matter of dollars and cents. Clark says retirees can't automatically assume that buying a home makes the most economic sense – you have to crunch the numbers.

“The New York Times has a very good rent vs. own calculator,” she said. “Punch all the numbers in and see which option makes more sense, based on how much you expect to get out of your house, how much you expect to spend on rent.”

Clark said she went into this experiment thinking she should purchase a condo. But she found arguments for both sides.

“To me, the idea of paying this rent every single month and not building any equity seemed a little scary,” Clark said. “On the other hand, condo association fees can go up and you have no control over that.”

Variables

A lot of variables go into such a decision, including where you happen to live. Some markets are affordable but some aren't. As we have recently reported, rents are rapidly escalating, but in some markets more than others.

Also, you have to be prepared to move again in the short-term when you rent. If you're 68, it may not be such a big deal. If you're 78, it might be.

At any rate, Clark says the idea of renting in retirement may become more common as Baby Boomers retire. It's definitely a subject to bring up with your financial advisor, she says.

With retirement looming, Baby Boomers are being warned that they may have too much money invested in the stock market.

In its second quarter analysis of its 401(k) accounts and Individual Retirement Accounts (IRA), Fidelity Investments reports Boomers approaching retirement have stock allocations higher than those recommended for their age group.

Fidelity said it compared average asset allocations to an age-based target date fund and found that 18% of people ages 50-54 had a stock allocation at least 10% points or higher than recommended. For investors ages 55-59, that figure increased to 27%.

Bonds have been losers

There is probably a good reason for that. With the Federal Reserve's 0% interest rate policy, stocks have been in a roaring bull market since they bottomed in March 2009. Bonds – the traditional choice for people entering retirement – pay almost nothing.

But the Fidelity analysis found that about 10% of its retirement account clients ages 55-59 had all their retirement assets in stocks. Whether or not the market corrects, as predicted, Fidelity says this is a risky strategy.

"One thing we learned from the last recession is that having too much stock, based on your target retirement age, in your retirement account can expose your savings to unnecessary risk – it's the hidden danger that many workers are unaware of,” said Jim MacDonald, president, Workplace Investing, Fidelity Investments. “This is especially true among workers nearing retirement, who should be taking steps to protect what they've worked so hard to save."

MacDonald says he isn't suggesting Boomers try to time the market. They should just make sure their assets are diversified as they approach retirement age.

“Checking your account on a regular basis and ensuring your portfolio is properly balanced can ensure your allocation stays on track," he said.

Opinions vary as to what constitutes a prudent retirement portfolio. According to Schwab, a “moderate risk” portfolio includes 60% in stocks. For retirees who want to play it conservative, Schwab suggests limiting stocks to 20% of the allocation.

Balances are down

The Fidelity analysis also found the average 401(k) balance went down slightly at the end of the quarter to $91,100 from $91,800 at the end of the first quarter. At the same time, IRA balances increased to $96,300 at the end of the period, up from $94,000 at the end of the first quarter.

The report also found an increase in clients taking out loans against their retirement accounts.

“While the percentage of people initiating a loan (10.1 percent) and the percentage of loans outstanding (21.9 percent) have remained steady over the last several quarters, the average 401(k) loan amount continues to increase,” the authors wrote.

The average loan amount reached $9,720 at the end of the second quarter, up from $9,630 at the end of previous quarter and $9,500 a year ago.

Internal Revenue Service (IRS) rules allow for loans from qualified 401(k) plans but not from IRAs. Loans are capped at 50% of the amount in the account. Repayment of the loan must occur within five years, and payments must be made in substantially equal payments that include principal and interest and that are paid at least quarterly.

The Greek financial crisis has focused attention on sovereign debt and the fact that it's not just businesses that can go bankrupt – so can governments.

Bringing it closer to home, the U.S. territory of Puerto Rico is also struggling under an unsustainable debt load. It owes $73 billion in debt it says it can't pay.

Bringing it even closer is the state of Illinois, where lawmakers have been unable to pass a budget. The state's governor and legislature are at odds over how to address growing shortfalls.

It is against that backdrop that Eileen Norcross of the Mercatus Center at George Mason University has analyzed the finances of each U.S. state, ranking its financial health based on long-term or short term debt.

Why should you care?

Why should you care what kind of financial shape your state is in? For one thing, a state struggling financially will likely be looking for ways to reduce services and might be more open to raising taxes.

Beyond that, if you are a current or retired state employee, your pension could be on the table at debt-reduction time.

And at an extreme, if you have invested in a state's municipal bonds to get a tax advantage, you want to be confident it won't one day pull what Greece is doing – telling its bond-holders, “sorry, we're not paying you back.”

First, let's look at pensions. Notably, Norcross says nearly all states have unfunded pension liabilities – meaning the money coming in, and expected to come in, doesn't match up with the money it has promised to pay current and future retirees.

These imbalances are large when measured against state personal income, suggesting potential trouble down the road. Norcross says another financial crisis could mean serious trouble for many states that are otherwise fiscally stable.

Natural resources help

For the ranking, Norcross analyzed each state's audited financial reports, looking for revenues, expenditures, cash, assets, liabilities, and debt. Not surprisingly she found states rich in natural resources, such as oil and natural gas, are in the best shape financially. The 10 strongest states are:

1. Alaska
2. North Dakota
3. South Dakota
4. Nebraska
5. Florida
6. Wyoming
7. Ohio
8. Tennessee
9. Oklahoma
10. Montana

These states are fiscally healthy relative to other states because they have significant amounts of cash on hand and relatively low short-term debt obligations, but Norcross says each state faces substantial long-term challenges with its pension and health care benefits systems.

Weakest states

The 10 states in the worst financial shape include those with large populations and a large number of services, as well as traditionally poor states:

41. Pennsylvania

42. Maine

43. West Virginia

44. California

45. Kentucky

46. New York

47. Connecticut

48. Massachusetts

49. New Jersey

50. Illinois

The good news, Norcross says, is that most states have just about recovered from the Great Recession. The bad news? There are troubling signs that many states are still ignoring the risks on their books, mainly in underfunded pensions and health care benefits.

Ask different financial planners how much you need to retire and you are likely to get several different answers. That's because there are a lot of variables, depending on each individual's situation.

But all will tell you the same thing. You need to be saving money. Now.

Fidelity Investments suggests that by age 35, you should have saved 1 times your current salary, then 3 times by 45, and 5 times by 55.

“Setting up clear goals linked to your salary can help simplify your planning, and help you determine if you are on track throughout your working life,” said Fidelity Executive Vice President John Sweeney. “Having such guideposts is particularly important in today’s workplace, where layoffs, job switching, longer life expectancy, and escalating health care costs can complicate your efforts to save for retirement.”

How you save is important

The U.S. Department of Labor points out that how you save can be just as important as what you save. Inflation and the type of investments you make play important roles in how much you'll have accumulated at retirement.

For example, if you're putting your savings into low-yield bonds, or even worse, certificates of deposit, it may reduce risk of losing the investments but it will do well to keep up with inflation.

Know how your savings or pension plan is invested. Learn about your plan's investment options and ask questions.

Diversify

One way to reduce risk is to diversify, by putting your savings in different types of investments. Your investment mix may change over time depending on a number of factors such as your age, goals, and financial circumstances. Financial security and knowledge go hand in hand.

While young people have the advantage of a long time line before retirement, they face a very difficult savings environment. Wages have been slow to grow while many everyday expenses haven't. With young families, many Millennials face obstacles in setting aside money for the future.

However, they appear to be doing it. T. Rowe Price's latest Retirement Saving & Spending Study concludes this generation has relatively good financial habits, especially when compared with a national sample of their parents' generation.

Both samples in the study had 401(k) retirement accounts. While Millennials are not saving at least 15% of their annual salary for retirement as recommended, they acknowledge the importance of saving for retirement and are interested in saving more.

Better habits

The study identified several areas where Millennials have better money habits than Baby Boomers. They are more likely to carefully track monthly expenses and stick to a budget.

"It's encouraging to learn that millennials are so receptive to saving for retirement and are generally practicing good financial habits," said Anne Coveney, a senior executive at T. Rowe Price. "These Millennials are working for private sector corporations, with a median personal income of $57,000 and an average job tenure of five years. So their circumstances may be somewhat driving their behaviors. When they have the means to do the right thing, it appears that they often do.”

Yet Coveney worries about the difficulty young savers face. Median pay raises for this group were a paltry 3%. Still, she says she's impressed by Millennials' financial discipline in managing their spending and are defying stereotypes that this generation is “prone to spend-thrift, short-sighted thinking."  

As data continues to pile up about the financial condition of older Americans, one conclusion is becoming pretty clear. For millions of Americans, there probably won't be any retirement.

At least, not a retirement that fits into the traditional meaning of the word. A new report (PDF) from the General Accountability Office (GAO) shows a disturbing number of Americans are approaching their retirement years with no savings and few, if any, assets.

Their future may then depend on whatever income they can derive from continued employment and the increasingly fragile lifeline provided by Social Security.

52% have no savings

In a report produced as the request of Sen. Bernie Sanders (I-VT), the GAO found that 52% of U.S. households age 55 and older have no retirement savings, such as in a 401(k) plan or an IRA. Worse still, the agency found many older households without retirement savings have few other resources, such as a defined benefit pension, non-retirement savings or other assets.

The older Americans who do have retirement savings are in much better shape because the GAO found they typically also have other financial resources, such as pensions, non-retirement savings and real assets like property.

Among those who have some retirement savings, the median amount of those savings is about $104,000 for households age 55-64 and $148,000 for households age 65-74. GAO estimates that is the equivalent to an inflation-protected annuity of $310 and $649 per month, respectively.

Relying on Social Security

Social Security provides most of the income for about half of households age 65 and older. GAO says these benefits offer 2 primary advantages; they are monthly payments that continue until death and adjust each year to provide cost-of-living increases.

But U.S. workers have been paying into Social Security at a much slower rate than retirees have been withdrawing it. As a result GAO says the Social Security trust fund is projected to run out of money in 2034.

What happens then is anyone's guess but one option is to reduce payments to cover just 75% of benefits. Another is to increase the withholding of the FICA tax, as was done in 1983.

The Social Security Administration reports that as of April 2015 the average Social Security benefit received by retirees was $1,333 a month.

Unable to maintain lifestyle

GAO said it reviewed a number of different surveys and studies about Americans' retirement savings pattern and found widely differing conclusions. But its analysis shows that at least one-third to two-thirds of workers will be unable to maintain their present lifestyle if and when they retire.

Perhaps because of that, younger Baby Boomers say they plan to work longer than they previously assumed. Workers age 55 and older say they expect to retire later and a higher percentage plan to work during their traditional retirement years.

For those who can keep working, that helps address the lack of savings. However, as the GAO report points out, about half of current retirees said they retired earlier than planned when health problems cropped up or when their employer downsized or went out of business.

The GAO report says that suggests that many workers may be overestimating their future retirement income and their ability to accumulate future savings.  

Twenty years ago retirement in America was a bit easier. You might have worked at the same company for most of your career and looked forward to a nice pension to supplement Social Security and savings. The house in which you and your spouse had raised a family was just about paid for.

Since then America has experienced a housing boom that tempted many people to use their homes like an ATM, followed by a housing bust that led to the biggest wave of foreclosures since the Great Depression.

A 2012 report by AARP found that 5 million Americans age 50 or older had lost their homes to foreclosure during the housing collapse. The report's authors were also disturbed that a growing number of people were carrying mortgage debt into retirement.

“More older Americans are carrying mortgage debt than in the past, and the amount of that debt is also increasing, leading to their worsening situation,” said Debra Whitman, AARP executive vice president for policy. “It’s one thing if your housing value goes down in your 50s. It’s another thing if you’re 75. For some people, it’s not like you can go back to work.”

Scam targets

While housing is a big challenge, it isn't the only financial challenge seniors face. The Consumer Financial Protection Bureau operates an Office for Financial Protection for Older Americans. It notes that older adults are prime targets for financial exploitation both by persons they know and trust and by strangers.

“Financial exploitation has been called 'the crime of the 21st century,' with one study suggesting that older Americans lost at least $2.9 billion to financial exploitation by a broad spectrum of perpetrators in 2010,” CFPB writes in its resource guide, “Money Smart for Older Adults.”

A recent scam targeting seniors involved the pretense that the caller was affiliated with a government program providing benefits to senior. Last October a federal judge stopped a telemarketing scheme that tricked senior citizens by pretending to be part of Medicare, and took millions of dollars from consumers’ bank accounts without their consent.

Unfortunately, these types of prosecutions tend to be the exception rather than the rule. CFPB says senior exploitation is an “epidemic” that flies under the radar. In most cases, the agency says, seniors who lose money – sometimes their life savings – have no way to get it back. It's an economic setback with an exponential impact on their future.

Family matters

Since the financial crisis income growth has slowed to a crawl and labor force participation has sharply declined. That has hit many older adults doubly hard if they are still in the job market. Not only is their income not growing, they are often called upon to financially support their adult children.

A recent report from the Pew Research Center found 61% of U.S. seniors had provided financial support to an adult child in the last 12 months. This is a number that worries many financial planners who work with seniors preparing for retirement.

Financial services firm Ameriprise says 23% of Americans 50 to 79 report their retirement savings have gone off track because they are financially helping adult children. The firm offers this advice: take a step back to see if you are enabling a problem or supporting a new solution.

If the financial gift is a short-term fix and no major behavior change accompanies it, the problem is only being postponed and could lead to multiple cash requests over time.  

You’ve lived the American dream, starting your own business from the ground up, building it into a thriving successful enterprise that has supported your family, provided a needed product or service and created jobs.

Now that it’s time to retire, what do you do with the business?

You have a number of options. Many business owners sell to current key employees. Others sell to a competing or complementary company.

Regardless of the type of sale, many owners of “middle market” companies hire the services of an investment bank to facilitate a sale for the best price and on the best terms. There is no precise definition of a middle market company but it’s generally considered to be a business generating between $5 million and $1 billion in revenue per year.

One of the most important things an investment bank will do is establish a value for the business. Setting the right price means selling it quickly without leaving money on the table.

When entering into an agreement with one of the investment banks serving this sector, it is important to understand how it goes about its job and how it will analyze and help you establish a fair value for your business.

Industry experts say personalities will be very important. A seller needs to be comfortable with the bank’s representatives and confident they will be able to deliver.

There are many investment banks but we’re going to review 5 that may be ideally suited to help Baby Boomer business owners transition to retirement. They are Houlihan Lokey, Harris Williams, Baird, William Blair and Lazard Middle Market.

Houlihan Lokey

Houlihan Lokey, Inc., based in Los Angeles and founded in 1972, is one of the largest privately owned investment banks in the world. Its wide-ranging business includes advising large public, as well as closely held companies. It also provides services to institutions and government entities.

It specializes in mergers and acquisitions (M&A), capital markets, restructuring, fairness opinions and valuations.

Houlihan Lokey is known for assembling smart, talented teams. Its rigorous hiring practice tries to identify and employ quantitative thinkers who can devise creative solutions to clients’ problems.

Global in its reach, Houlihan Lokey has more offices than you might expect for a middle market bank – throughout the U.S. as well as Europe and Asia. Its U.S. presence is evenly spread across the country.

Most banks have specialties and Houlihan Lokey is highly experienced dealing with aerospace and defense, financial services, business services, energy, consumer food and retail, health care, media and telecommunications, real estate, hospitality, technology and transportation.

Our experts say Houlihan Lokey is a good choice for owners of privately held or publicly traded companies, owners of family businesses, executives at any middle market business and representatives at private equity firms.

Harris Williams

Harris Williams was founded in 1991 by 2 Harvard Business School graduates and since 2005, has operated as a subsidiary of PNC Financial Services. Based in Richmond, Va., the firm has offices in San Francisco, Boston, Philadelphia, Cleveland, Minneapolis, London and Frankfurt.

From the beginning the company built its reputation on its expertise in leveraged buyout (LBO) services. Because of this it has extensive connections to private equity sponsors.

Harris Williams takes a team approach, setting up industry groups that focus on aerospace, defense and government, building products and materials, business services, consumer, energy and power, health care and life sciences, industrials, specialty distribution, technology, media and telecom and transportation and logistics.

In one of its recent transactions, Harris Williams advised Health & Safety Institute, Inc. (HIS) on its sale to The Riverside Company. The firm deployed 2 of its teams to guide the transaction – Todd Morris, Andy Dion and Andrew Hewlett of the Healthcare & Life Sciences Group and Mike Wilkins of Harris Williams’ Technology, Media & Telecom Group.

"We are thrilled to have represented HSI’s shareholders in this transaction,” Morris said. HSI’s history of innovation and outstanding product quality, customer service and dedication to helping save lives has positioned it for strong continued growth and success in partnership with Riverside."

“HSI is well positioned to capitalize on training industry trends driving demand for its online and mobile products and services,” Wilkins said. "We expect to see additional growth and consolidation in the broader education and training markets.”

Our experts suggest Harris Williams is a good fit for owners of both privately held and public companies, owners of family businesses, executives at any type of middle market business, representatives at private equity firms and family offices, and representatives of local governments and sovereigns.

Baird

Baird is a major global middle market investment bank with a wide array of talent and a broad focus. It provides advisory, financing and restructuring services to publicly traded corporations, privately held and entrepreneur-owned companies, and private equity firms through an interconnected and highly specialized international team.

Founded in 1919 as the securities department of First Wisconsin National Bank, the Milwaukee-based financial services firm today has offices on 3 continents, providing investment banking, capital markets, private equity, wealth management and asset management services to individuals, businesses, institutional investors and governments.

Baird’s primary middle market investment banking offerings and focus are in equity raises, M&A and public finance. One of its most recent M&A transactions was when it advised Bad Daddy’s International LLC on its acquisition by Good Times Restaurants Inc.

In 2007, Bad Daddy’s founders’ created an upscale burger concept with “simple foods prepared to high culinary standards.” Bad Daddy’s became known for its signature burgers, salads, appetizers and sandwiches paired with local craft microbrew beers and signature cocktails and has won many awards and accolades for its culinary creations.

Bad Daddy’s, based in Charlotte, N.C., consists of seven company-owned restaurants and six franchised / licensed restaurants in North Carolina, South Carolina, Tennessee and Colorado.

Good Times Restaurants Inc. operates Good Times Burgers & Frozen Custard, an upscale quick-service restaurant chain focused on fresh, high quality, all natural products, making it a good fit with Bad Daddy’s Burger Bar, a full service, “small box” better burger casual dining chain.

Baird also specializes in equity financing. It recently completed a $249 million refinancing of P&L Development’s existing debt. PLD is a company that manufactures, packages and distributes over-the-counter pharmaceutical products and health care goods.

Baird is often referred to a “one-stop  shop” investment bank because of the range of services it provides. Our experts say it is a good fit for many middle market business owners who can profit from Baird’s expertise.

William Blair

Founded in 1935, in the midst of the Great Depression, William Blair today is an employee-owned firm providing investment banking and other financial services from its Chicago base and offices in London, San Francisco, Tokyo, Liechtenstein and Zurich.

Much like Baird, William Blair is thought of as a one-stop shop, whether a company is trying to raise equity or launch an initial public offering (IPO). It benefits from a stellar reputation among its peers, a result of rigorously protecting its brand.

The company has deep ties into the private equity community which can benefit both it and sellers hoping to be acquired by a private equity firm. Its strategic investment in BDA, another international investment bank, gives Blair special access to Asia, a significant source of investment dollars.

The investment bank’s focus is on consumer and retail, energy, financial services, health care, industrials, services and technology. Its advisory services include comprehensive sell- and buy-side advice for publicly traded and privately held companies. Its strength, the company says, is being able to identify the best transaction partners anywhere in the world, structure and negotiate transactions, and deliver the best outcomes for clients.

It can facilitate financing through equity capital markets or by providing access to private equity, leveraged finance and debt capital markets.

In early 2015 William Blair acted as the exclusive financial advisor to PowerPlan, Inc., a portfolio company of JMI Equity and TPG Growth, in connection with its sale to Thoma Bravo. The transaction closed in February.

Blair said it positioned PowerPlan as the only enterprise software vendor capable of helping asset-centric businesses such as utilities and oil and gas pipelines optimize financial performance of fixed assets.

“As the undisputed leader in a market with high barriers to entry and a strong growth profile, PowerPlan commanded strong interest from both private equity investors and strategic acquirers,” the bank said in a statement.

Our experts say William Blair is an ideal fit for privately held corporations, owners of publicly traded companies,, owners of family held businesses, executives at any type of middle market business,, representatives at private equity firms and family offices.

Lazard Middle Market

Lazard Middle Market (Lazard MM) is the middle market arm of the elite boutique investment bank Lazard, founded in 1848. Lazard Middle Market focuses primarily on putting together deals in the U.S. It. has offices in Chicago, Charlotte, Houston, Minneapolis and New York.

Lazard Middle Market is highly active in the area of M&A, making it a good choice for middle market firms that would like to be acquired. Because the bank works closely with private equity groups it is ideally placed to put buyers together with sellers.

Like other banks, Lazard Middle Market has its areas of specialty: business services, education services and technology, financial services, food and consumer, healthcare and industrials. Senior bankers focus on specific industries, allowing them to use their insight into and understanding of the various business sector ds and key players.

The bank tailors its services to meet the unique needs of mid-sized companies. It is able to provide the sophisticated services, global perspective and broad resources of Lazard, its parent.

Our experts believe Lazard Middle Market is a good fit for owners of both privately held and publicly traded companies and executives at any type of middle market business. It could be especially advantageous for companies in the higher end of the middle market.  

American aren’t saving enough for retirement. That’s one problem. But a second problem is that Americans who have the chance to boost their retirement savings by taking advantage of their employers’ match simply aren’t doing it.

In some companies, but not all, an employer will match a portion of the employee’s contribution to his or her retirement account, based on how much the employee saves. The bigger the employee’s contribution, the bigger the employer’s match.

Since it is essentially free tax-deferred money it is one of the best ways to boost your retirement savings. But a new report from Financial Engines has found a large number of Americans who have access to an employer match aren’t taking full advantage of it.

Two conclusions

The study reached two main conclusions. First, 25% of employees did not save enough in their 401(k) accounts to achieve a full match by their employer. In 2014 the average employee left $1,336 in matching contributions on the table because they did not put enough of their own money into the savings account.

Second, lower income and younger employees were the most likely to pass up the free money. That’s likely because lower income employees don’t believe they can afford to put money aside and younger employees have not yet focused on the reality of eventual retirement.

Of the employees not taking advantage of their employer’s match, the average worker will miss out on $42,855 of retirement savings over a 20 year period.

“We estimate that nationwide, American employees are passing up approximately $24 billion in employer matching contributions by not saving enough to receive their full employer 401(k) match,” the authors write.

The study found that 42% of plan participants who earned less than $40,000 a year do not take full advantage of the employer match. On the other hand, only 10% of those earning $100,000 or more are passing up the money.

When age was considered, 30% of younger workers left money on the table while only 16% of older workers did.

What to do

If you find yourself in the situation where you are not taking full advantage of your employer’s plan, there are things you can do to turn that around. First, find out more about the plan and how the employer match works. For example, how much do you have to contribute to trigger your employer’s full match.

Talk to an unbiased financial advisor about ways to take full advantage of your employer’s retirement plan. An advisor may also propose ways to increase your savings you haven’t thought of.

Resolve to increase your retirement savings at every opportunity. If you can’t afford to increase your savings enough today to achieve the full match, make that your goal and up your savings each year.

There used to be an old saying, “you're as old as you feel.” It was normally said by old people trying to convince themselves they weren't.

But increasingly science has begun to back that up. Sometimes, you see examples of it in real life – ordinary people active and alert into their 90s. Athletes on the field long after peers from earlier generations would have retired.

In Superbowl 49 last February, New England Patriots quarterback Tom Brady had the game of his career at age 37, and no one is suggesting he is close to hanging up his cleats.

Sergei Scherbov, who led a research team studying how people age, says better health and longer life expectancy has turned ideas about what constitutes “old age” on its head.

Time lived or time left?

"Age can be measured as the time already lived or it can be adjusted taking into account the time left to live,” Scherboy said. “If you don't consider people old just because they reached age 65 but instead take into account how long they have left to live, then the faster the increase in life expectancy, the less aging is actually going on."

Scherboy notes that 200 years ago, a person who reached age 60 was old. Really old. In fact, they had outlived their life expectancy.

"Someone who is 60 years old today, I would argue is middle aged,” he says. "What we think of as old has changed over time, and it will need to continue changing in the future as people live longer, healthier lives."

People in their 60s and beyond may have a few advantages the generations that went before them didn't have. Health care services are better than in the past. There is better knowledge about destructive habits, like smoking and poor diet.

Money helps

Today's older generation is also wealthier. A 2011 British survey found a third of people in their 60s said they were in the best financial shape of their lives, compared to just 23% of their younger peers. They took more vacations and enjoyed life more.

Organizations like AARP have promoted the idea of active, healthy people in their 60s, 70s or older, encouraging “seniors” to stay engaged both physically and mentally. In many cases that means working longer, if desired. But that can sometimes present a whole different set of problems.

Bill Heacock, who runs his own business as a seminar trainer, is 61 and has no intention of quitting. But he tells AARP he's worried that his much younger clients have a hard time seeing past his gray hair. Yet he eats wisely, runs 20 to 25 miles per week and weighs less than he did in college.

What's old?

Stony Brook University researcher Warren Sanderson says someone like that should not be considered old.

"The onset of old age is important because it is often used as an indicator of increased disability and dependence, and decreased labor force participation,” he said.

A 2009 Pew Research Center study asked Americans to define when someone is “old.” As you might expect, the answers were wide ranging. Only 32% said when someone hits 65 years of age. Seventy-nine percent replied when someone celebrates their 85th birthday.

You know you should be putting money away for retirement but there are bills to pay. Incomes have been stagnant since the financial crisis but costs have continued to climb.

Gasoline prices may seem relatively low now but between 2011 and 2014 the average U.S. price at the pump fluctuated between $3.50 and $4.00 a gallon. Rents have been steadily climbing since 2009.

Significant disconnect

So it's little wonder that a new study by financial service firm Edward Jones uncovered a rather significant disconnect between what people say they plan to save for retirement and what they actually save.

Young consumers in the survey between ages 18 and 34 said they know they need to save. Ninety percent said they plan to start a retirement next egg before they turn 30.

But then the survey takers talked to the next age group, those 35 to 44, they discovered that only 64% had actually begun saving in the 30s or before.

"When it comes to retirement savings, there's a big difference between planning to save and actually doing so," said Scott Thoma, principal and investment Strategist for Edward Jones. "While intentions to save for retirement are legitimate, individuals tend to satisfy more immediate, short-term spending goals and push off their long-term saving goals.”

Scary data

For policymakers, this should be scary data. It suggests more Americans will be more dependent – not less – on Social Security in old age. For individual investors, Thoma says their 30s and 40s are the time when investing a little money has a good chance to grow into a lot by retirement time.

The youngest Americans are not alone in not living up to their savings intentions. Twenty-two percent of respondents said they planned to start socking money away between the ages of 40 and 50. However, when examining their plans versus reality amongst respondents ages 35 to 44, just 3% had actually started saving. The results were better for those 45 to 54 – 30% had actually started saving.

Kids make a difference

It shouldn't come as a surprise that the presence of children and larger household size in general has a dampening effect on actual retirement savings. The survey found that singles are much more likely – 61% – to have begun saving for retirement. In households with 3 or more people, that rate falls to 49%.

In families with children or aging parents, other financial needs often compete for a wage-earner's resources.

"Parents are recognizing the need to save earlier in order to account for additional costs, like education," said Thoma.

The U.S. Department of Labor estimates that fewer than half of Americans even know how much money they will need for retirement. It found that in 2012, 30% of private sector employees with access to a retirement savings plan did not participate.

There should be no generational finger-pointing when it comes to how well or poorly we manage our money for the future. A new survey suggests we could all learn a thing or two.

The evidence is submitted by Financial Finesse, a company running financial wellness programs in the workplace. Each year it studies financial priorities and vulnerabilities of Millennials, Generation X, and Baby Boomers.

This year, the survey finds that different circumstances may be causing them pain, but members of all three generations have money problems.

Millennials

First, let's look at what the study found out about Millennials. This under-30 generation probably bears the deepest psychological scars from the Great Recession. It has influenced the way they spend and manage money and, perhaps most significantly, has influenced their housing decisions.

They seem to have a lot in common with their great-grandparents' generation that survived the Great Depression with a distrust of financial institutions. Their focus appears to be on not losing money rather than growing it for the future. As a result, they tend to shy away from the stock market and home purchases.

This group as a whole also isn't doing much to plan for retirement. It has the lowest 401(k) participation rate of all generations.

Gen X

The survey finds members of Generation X, between the ages of 30 and 51, are actually the most at-risk financially. Why? The authors think Gen Xers may be putting their children first, at the expense of their own financial security.

When questioned, just 17% of Gen Xers said they are confident they are on track to achieve their income-replacement goal by the time they retire. Instead of pumping up their retirement accounts, 23% said they are contributing to a 529 college savings plan.

Boomers

Boomers, people between 51 and 69, are by far the wealthiest generation but Financial Finesse warns they face an impending health care crisis because of longer life spans and inadequate insurance planning. Only 16% of Boomers said they have long-term care insurance. Meanwhile, the Department of Health and Human Services (HHS) projects that 70% will need some level of care in retirement.

Financial Finesse’s advisers say they are most concerned for Generation X employees who they urge to re-evaluate their retirement plans with the expectation of less money from Social Security, increasing health care costs, reduced employer benefits, and longer life expectancies than Baby Boomers.

Oh yes, there's also the rising national debt. While both Gen X and Millennials will be left to deal with that mess, probably through higher taxes, but the firm points out Gen X has less time to reconcile their finances than Millennials.

“Is this solvable? Absolutely, but it will require a herculean effort,” said Liz Davidson, CEO and founder of Financial Finesse.

Suicide, especially involving suffocation, is rising at a rapid rate for adults between 40 and 64, with researchers pointing to the economic downturn as the likely culprit. 

"Relative to other age groups, a larger and increasing proportion of middle-aged suicides have circumstances associated with job, financial, or legal distress and are completed using suffocation," said Katherine A. Hempstead, one of the authors of a new study.

"The sharpest increase in external circumstances appears to be temporally related to the worst years of the Great Recession, consistent with other work showing a link between deteriorating economic conditions and suicide. ... Financial difficulties related to the loss of retirement savings in the stock market crash may explain some of this trend," she added.

In the immediate aftermath of the financial crisis and Great Recession, people approaching retirement decided to keep working. The thought of living without a paycheck, even among those who had been saving for retirement, just seemed too scary.

It's apparently looking less scary if a survey by jobs site CareerBuilder.com is accurate. The annual retirement survey finds the number of people age 60 or older who plan to put off retirement for a few years is at a post-recession low.

It's still pretty high – about 53% – but it's down sharply from last year's 58% and 66% in 2010. There are some encouraging economic factors contributing to this new-found confidence.

Rebounding from the recession

“As household financial situations continue to rebound from the recession, economic confidence among senior workers is significantly improving,” said Rosemary Haefner, chief human resources officer for CareerBuilder. “Reaching retirement, however, is proving to be a challenge for millions.”

For those who plan to keep working – or find new jobs – past the traditional retirement age, there is good news. Companies seem to value employees who have a little gray hair. Haefner says employers are hiring seniors at a faster rate than in recent memory.

Deep scars

The survey shows the Great Recession has left deep scars on older workers. Of those saying they plan to delay retirement, 75% attribute their decision to the recession.

Twelve percent say they don’t think they will ever be able to retire. That's up slightly from 11% last year. Of those delaying retirement, nearly half think retirement is at least 5 years out.

Working after retirement

Retirement, of course, isn't what it used to be and many who are quitting their day jobs plan to find other work once they retire. More than half of 60-plus workers say they'll work after retiring from their current career, a sharp increase from the 45% who said that in last year's survey.

Of this group, 81% say they’ll most likely work part-time, while 19% plan to continue working full-time.

Why stop working, only to take another job? Most likely it can be explained by a desire to do something else. Some people stick with a job they don't particularly like because it pays well or has a nice benefits package.

The new job might not pay as well but might be a lot more personally gratifying. Bankrate.com lists 10 part-time jobs for retirees including consulting and customer service.

U.S. Newsnarrows the list down to 8, but includes working for a retailer where you like to shop. Uber is running an online pitch to retirees to become drivers, working when they want to pick up some extra cash.

Whatever kind of post-retirement work people look for, the Careerbuilder survey suggest they will find willing employers. Fifty-four percent of private sector employers hired people age 50 or older in 2014 – up 6 points from last year’s 48% – and 57 percent plan to do so in 2015.

Americans approaching retirement age are worried about lots of things, including having enough money to live on after they stop working. With so many people struggling to save for retirement, that might not be an unreasonable fear.

In particular, retirees and the soon-to-be retired worry about the cost of health care. A new survey by Bankrate.com found upper income households in the U.S. are more concerned about covering medical expenses in retirement than the overall population.

But it is important to understand the real numbers behind those projected retirement health care costs. Depending on individual circumstances – like whether you have Medicare supplemental insurance, they may not be as high as you think.

Fidelity Investments estimates a couple retiring in 2014 is expected to need $220,000 in today’s dollars to cover health care costs in retirement, admittedly a hefty amount for most retirees. However, it's important to understand how that number is calculated.

Cost calculator

AARP has a retirement health care cost calculator that can help show how this formula works. We decided to check it out.

After assuming a male in good health is retiring this year at age 65 and will live another 20 years, we entered the data and ran the numbers. The calculator estimates he would need $134,134 worth of health care. Admittedly, that sounds like a lot.

But our fictitious retiree really isn't going to have to come up with that amount. When we examined AARP's explanation of the numbers, we see that $77,012 would be covered by Medicare. The remaining $57,122 would be paid out of pocket. Still sounds kinda scary.

Medicare covers 80% but most people purchase Medicare supplemental policies, to cover what Medicare doesn't. So the $134,134 total includes both what Medicare pays for and what a consumer would likely pay out for pocket for health services without having supplemental coverage.

Breaking it down monthly

But assuming our retiree would pay around $100 a month for Medicare coverage, deducted from his monthly Social Security payment, and $100 or more a month for a supplemental policy, he would cover his medical expenses for $200 to $300 a month.

What about the $57,122 he still needs to come up with? Well, that's what the $200 to $300 a month goes toward.

If you divide $57,122 by 20 years, you get $2,856 a year. Break that down into 12 monthly payments and it's $238 a month – a lot less scary than $134,134.

Still a significant bite

None of this is to minimize health care costs in retirement, which will continue to go higher. And retirees will need to be able to to afford the $238 monthly payments while still paying for everything else so there is every reason to put away as much money as you can.

It just means you don't necessarily have to have $134,134 set aside for medical expenses the day you stop working.

There will be plenty of other demands on your resources in retirement and unfortunately, the Bankrate survey found a third of Americans said they can't save more for their retirement because they are barely making ends meet now. Only 29% of those questioned in the survey said they were satisfied with what they are able to save.

Reality check

One bright spot in the survey is the fact that only 13% of Americans expect Social Security to account for all or most of their retirement income.

"The average Social Security payout is only around $15,000 per year, so people are realistic to think they'll need to supplement that income," said Sheyna Steiner, senior investing analyst at Bankrate.com. "But despite all the gloom and doom about the future of Social Security, most Americans are optimistic that they'll get at least something from the program. That even includes Millennials – 63% of them think Social Security will fund at least some of their retirement several decades from now."

There's a theory that as people age, their financial decision-making declines, along with physical and mental abilities. But is that really the case?

New research from the University of California, Riverside suggests it isn't.

First, the research team separated 2 types of intelligence; on one side of the ledger it placed “crystallized intelligence," which is gained through experience and accumulated knowledge.

On the other side, "fluid intelligence," the ability to think logically and process new information. Past research has clearly shown that fluid intelligence decreases with old age, a phenomenon known as "cognitive decline."

Both are important to financial decision-making, but the researchers give added weight to “crystallized intelligence.” The knowledge you have gained over a lifetime of money management, they say, more than makes up for cognitive decline, in most cases.

Staying golden

"The research shows that despite cognitive graying, older people's financial decision making may be more 'golden' than a slowing brain might otherwise suggest," said Ye Li, an assistant professor of management and marketing at the UC Riverside School of Business Administration, who is the lead author of the paper.

The study may get added attention because of the fast-growing population of older Americans. One in 5 Americans is expected to be over 65 years old by 2030. And it's not just an American phenomenon – the number of people 65 and older worldwide is expected to double by 2035.

Where the money is

This is important because older people control vast amounts of wealth. As they age they will have to make decisions about how to manage and spend it, ensuring that they don't outlive it.

Public policy changes in health care and retirement planning have transferred many complex decisions to individuals. While some worry that older consumers will be more likely to make costly mistakes with their money, the researchers looked at credit scores, which told a different story.

If an older person has made sound decisions throughout their lifetime, the researchers say that prospect tends to continue in their advancing years, and can be measured through their credit scores.

Help from pros

This may be reassuring to some aging consumers who manage their own retirement money but the fact is, a majority of seniors with significant assets seek professional guidance.

That's because for those who have managed to save a retirement nest egg, the challenge of managing it in retirement may be much greater than the challenge of saving. To produce income the funds need to be put to work. But investing – anything beyond bank CDs – involves risk. As people reach retirement they tend to be less tolerant of risk.

"Generating retirement income is comparable to that of a NASA engineer trying to land a spaceship on Pluto," Eleanor Blayney, consumer advocate at the Certified Financial Planner Board of Standards, told us back in January. "Everything may be optimized and perfectly calculated to give the highest probability of success, but without mid-course corrections along the way, the likelihood of achieving the goal – of landing the ship or generating enough income to live on during retirement – is very low."

That may be true, but the UC Riverside research suggests older consumers should not abdicate complete control over their finances to outside sources.

While a qualified wealth manager may offer up sound advice, seniors who have gained a lifetime of experience building a portfolio should still have the gray matter to judge that advice, even when their hair turns gray.

If you ask most people saving for retirement where their money is invested, chances are they'll say it is in mutual funds.

These funds, made up of a variety of different assets, are popular because the average saver doesn't have to think that much about them. The stocks within the individual funds are selected by professional money managers, who are paid to know which stocks to buy and which to sell.

Earlier this year stock-picking guru Jim Cramer, host of CNBC's "Mad Money," ruffled feathers among professional money managers when he told his audience that “most company 401 (k) plans stink.”

"They have high management fees and administrative costs that eat into your returns, and worst of all, they typically offer you lousy choices for your investments and not nearly enough control over them," Cramer told his audience. "The 401(k) business is a racket for the managers who get to charge you these fees.”

He went on to recommend that people instead consider investing in a carefully-selected portfolio of about 10 diversified stocks.

It perhaps should be noted that the whole premise of Cramer's show is to instruct viewers on how to select individual stocks, so his advice might be considered in that light. But the fact remains that millions of individual investors would rather trust their stock picks to the experts.

How good are the experts?

But how good are the experts at picking their own investments – not the stocks they pick for the funds they manage but those in their personal retirement savings? A couple of finance professors took up the question and say you may be surprised at what they found.

"We asked the question whether financial experts make better investment decisions than ordinary investors," said Andriy Bodnaruk, an assistant finance professor at the University of Notre Dame.

He and colleague Andrei Simonov from Michigan State University selected two groups of investors. One was made up of people who have been trained in finance and had day-to-day experience with financial markets as mutual fund managers.

The second group of investors shared a number of socioeconomic characteristics but lacked financial training. In other words, they were amateurs. The researchers compared how the two groups fared in the market.

No difference

"We found that financial experts are no different from peer investors: they do not have ability to pick outperforming stocks, they do not manage risk of their portfolios in better ways, and they trade as often as other investors," Bodmaruk said. "The only time experts do better than non-experts is when they have access to better information stemming from their workplace."

And of course, that information counts for something. One of the hallmarks of a well-managed fund is it is usually supported by extensive research. But even Bodnaruk and Simonov concede that picking stocks can be an inexact science.

"Outperforming the stock market is very difficult and the overwhelming majority of investors, including experts, do not have the skill to do it," Bodnaruk said. "Markets by and large are efficient to the degree that very few investors can consistently perform better than a fair reward for the risk assumed.”

Role of financial advisors

Bodnaruk says investors should not chase "expert talent," but he's really talking about fund managers, not financial advisors. Financial advisors who are not trying to sell a product but simply offer investment guidance, can be a valuable resource as you build a next egg.

If nothing else, a good financial advisor can be a sounding board to discuss investment ideas and their questions and advice can keep you from making costly mistakes. Should you invest in mutual funds or index funds and ETFs as the researchers suggest? Or individual stocks as Cramer recommends?

If you have a qualified and trusted financial advisor to talk to, you don't have to make that decision alone.

Often overlooked in the numerous discussions about the urgency of retirement saving are the potential obstacles for the self-employed.

People who are self-employed, either as business owners or independent contractors, don't have access to employer pensions or employer matches to retirement accounts. They're on their own when it comes to saving for retirement.

Michelle Perry Higgins, a financial advisor and Principal of California Financial Advisors in San Ramon, Calif., says that for a number of reasons, the self-employed often find it hard to save for retirement.

Unpredictable income

“A key characteristic of self-employed people, both business owners and independent contractors, is that their income is likely to be more unpredictable than that of employees,” she told ConsumerAffairs. “Business owners may have seasonable income flows or be subject to other market forces. They also tend to invest all their time and spare income in their businesses. Independent contractors may have difficulty lining up jobs consistently. Both practically and psychologically, the situation of both groups makes it difficult for them to save consistently for retirement and this is a huge problem.”

Granted, cash-flow is a major challenge for people who don't get a paycheck every two weeks. But the consensus of financial experts surveyed by U.S. News recently was that people who work for themselves should be putting way 15% to 20% of their salary for retirement.

But many self-employed might ask, “what salary?” Thomas Goodson, founder and CEO of a financial planning and wealth management firm in Santa Barbara, Calif., told the magazine that most small business owners pay themselves last, especially in the formative years of the business.

Counting their chickens

Higgins says many self-employed put off saving because they expect a windfall before they retire.

“Business owners may believe that they will be bailed out by selling their business,” she said. “The risk is that they don’t get the price they think they should get and are left with little for retirement after years of hard work.”

For business owners and independent contractors who want to get started on a retirement savings plan, the Simplified Employee Pension IRA, or SEP IRA, is a good vehicle. In fact, it is a retirement plan specifically designed for anyone with self-employment income. Contributions are tax deductible so it helps you build up savings while reducing your taxable income.

While you don't have a boss to match your contributions, your contribution is, in fact, an employer contribution. It doesn't come directly from your paycheck but from the business' gross earnings. Since you are not only the owner but an employee, the company is allowed to contribute up to 25% of your salary – up to $52,000 per participant this tax year.

Flexible

As someone who is self-employed, you are not required to contribute the same percentage of compensation every year. You can vary the percentage or even skip a year. However, if you have employees, you must contribute the same percentage of compensation for each employee who is eligible.

A SEP IRA is a retirement saving option if you are a sole proprietor, in a business partnership, own a business or you are an independent contractor earning self-employment income.

IRS Publication 560 has more information.

Consumers nearing retirement age are often lectured by financial planners to be saving more for the years when they aren't working. That's sound advice, but it should be added that getting rid of debt before retirement is also a key step to financial security.

That's rarely as simple as it sounds. Older consumers usually have mortgages, car payments and credit card debt, just like everyone else. Sometimes they are helping their children financially.

One way to make retirement more affordable is to pay off the mortgage before you stop working. If you bought your home 30 years ago and never refinanced, that isn't a problem.

Unfortunately very few people fall into that category. More likely homeowners refinanced several times – in the early 2000s to take out equity for other things – and more recently to lower interest rates.

Mortgage debt

With the slow recovery of the housing market, not only do many aging consumers not have much equity in their home, they are also early in the mortgage term. A recent AARP study shows that in recent years an increasing number of retirees still have mortgage debt.

A study by TIAA Cref shows more seniors are going into debt – to themselves. Nearly one-third of Americans who take part in a retirement plan say they have borrowed money from their retirement account for non-retirement expenses.

But the reasons for borrowing the money is interesting. The top reason given for the loan was to pay off other debt, including mortgages.

For every retiree who is able to burn their mortgage papers there are hundreds more that will carry significant debt into their Golden Years.

Becoming the norm

According to researchers at the Michigan Retirement Research Center, older persons today may be much more likely to enter retirement age in debt compared to decades past.

The percentage of consumers near retirement age having mortgage debt has risen by over 7 percentage points, from 41% in 1992 to 48% by 2008. The level of mortgage debt has also risen. The researchers say mortgage debt for near-retirees tripled between 1992 and 2008.

TIAA Cref cites statistics from the Employee Benefit Research Institute showing that debt levels for families headed by people 75 or older more than doubled in the 3 years from 2007 to 2010, to over $27,000. But pre-retiree Boomers were carrying even more debt – more than $107,000 in 2010.

Conflicting advice

Should you pay your mortgage off early? Some financial advisors suggest it isn't always the best move, if the payments are manageable and you have a low, fixed-rate. After all, it provides a tax deduction.

But that has to be measured against the cash flow benefit of adding $1000 or more a month to your budget because you aren't making a mortgage payment. There may be additional value in paying off a mortgage if you have savings earning little to no interest, given the current low interest rates.

If debt appears to be a problem that will follow you into requirement, the TIAA Cref researchers say you might have to consider postponing retirement, especially if the income you expect to get from Social Security, pensions and savings won’t cover debt payments and other fixed expenses.

If you’re struggling with credit card debt, they suggest waiting until you have a cash management plan you can stick to before leaving work.

Retirees, and people nearing retirement age, often worry they won't have enough money to support themselves in retirement. Starting a sideline business might be a way to stay busy and make a little extra income.

But choosing the right business is important. If money is already a concern, the last thing you should do is start a business that requires an upfront investment and ongoing overhead.

For example, opening a restaurant in retirement is probably a terrible idea. First, it will require you to put in about 60 hours a week, so it doesn't sound much like retirement.

Second, restaurants fail all the time. If it goes down, it could put you in much worse financial shape than before.

But starting a small business from your home, with a limited, specific objective, can provide both lifestyle flexibility and a small amount of regular income. Some of the suggestions we're about to offer will work best for certain skill sets and in specific locations.

Pet care

Pets are huge business. Consumers love their animals. If you also like dogs, cats and parakeets, a pet care business might be for you.

Dogs left alone at home during the day sometimes need walking, especially if the owner will be working late. If a pet owner frequently travels on business, they most likely would love to have someone they could rely on to look after their pets.

This business requires little more than some business cards and good word-of-mouth and social media activity.

Babysitting

Pets aren't the only things that need constant attention. Young parents often find it difficult to find trusted, reliable care for their children.

If you don't enjoy being around children, this might not be a business for you. But if you're a grandparent and have some experience with children, babysitting – let's don't call it child care because that may conjure up licensing requirements – provides a way to make good money.

Tutoring

Doing well in school has never been more important. Academic standards are rising and parents who want their children to continue their education in a good college hire tutors to help their children with particular subjects.

This business is ideal for a former teacher, but even a laymen with particular expertise in a subject like math or science can probably be a very effective tutor. Getting familiar with Common Core curricula will make your job easier and help you get clients.

Property management

There are more unoccupied homes and buildings than ever before. Absentee owners spend a lot of time worrying about the condition of these properties and might hire you to check on them, inside and out, on a regular basis.

Services might include light housekeeping or maintenance. Be sure to position yourself as a caretaker, not a security firm. Again, that can bring up unnecessary licensing issues.

Marketing services

Small businesses often need help promoting their business but can't afford to hire a marketing company or designate an employee to handle the chore. But if you can write well and are somewhat market-savvy, you may be able to offer your services to local businesses in your community.

Services might include writing a press release and getting it to the local newspaper, or ghost-writing an article for one of the many free publications that cover local communities and are always looking for free content.

And of course, if you can set up and maintain a Facebook page, many small businesses may find that attractive.

Senior IT support

Many older people often struggle with, or are intimidated by, computers and the Internet, but want to participate. If you are somewhat tech-savvy – you don't have to be an expert by any means – seniors might pay to have you come to their homes to straighten out problems with their computers and show them how to do things.

With more seniors choosing to age in their homes rather than institutions, the whole field of senior care is opening up.

Online sales

If you like poking through yard sales and thrift stores, you may find you often come across things that you can purchase for next to nothing – but others would pay much more for if they only had access.

Using auction sites like eBay, you may be able to buy low and sell high, with a huge margin on each sale.

Temporary staffing

Since the Great Recession businesses have been moving away from employees and toward independent contractors. While you might be looking for a part-time job somewhere, you may find you have more flexibility if you set yourself up as an independent temporary staffing agency.

There are likely a number of small businesses in your community that would like to be able to call on you from time to time when an employee is sick or on vacation. Since you are an independent contractor, you are free to turn down assignments, giving you more flexibility than you would have as a part-time employee.

While starting a small business in retirement can be way to stay busy and earn extra income, be careful about selecting the business you start. In particular, stay away from pre-packaged work-at-home businesses. The business you start on your own is likely to be a lot more successful than something you pay for.

The Federal Trade Commission warns that consumers have lost thousands of dollars on schemes that sounded great but turned out to be scams.  

Here's some disturbing -- and depressing -- news about retirement saving.

A new report from Bankrate.com shows that more than a third of the people it surveyed (36%) have not saved any money for retirement. Additionally, 69% of 18-29 year-olds haven't saved anything, along with 33% of 30-49 year-olds, 26% of 50-64 year-old and 14% of people 65 and older.

The survey was conducted by Princeton Survey Research Associates International.

But hold on, the news isn't all bad.

Those who are saving are starting earlier. Twice as many 30-49 year-olds started saving in their 20s as opposed to their 30s. But 50-64 year-olds were only slightly more likely to have started saving in their 20s than their 30s, and people 65 and older were almost evenly split between starting in their 20s, 30s and 40s.

"Regardless of age, there is no better time than the present to start saving for retirement," said Bankrate.com chief financial analyst Greg McBride, CFA. "The key to a successful retirement is to save early and aggressively, but even those on the cusp of their golden years should have some money allocated toward equities as opposed to all cash and bonds."

A little optimism

Consumers' feelings of financial security were unchanged from one month ago, indicating a slight improvement in their financial security compared to one year ago. Bankrate.com's August Financial Security Index registered at 100.1. Any number above 100 illustrates improved financial security compared to one year ago, while any number below 100 reflects deteriorating financial security.

The survey also found:

• Despite their lack of retirement savings, millennials feel more financially secure than any other age group. They feel more secure in their jobs and more optimistic about their current financial situation than any other age group.
• Job security, net worth and overall financial situation are all areas in which survey respondents note improvement over one year ago.
• There are twice as many people who less comfortable with their savings (compared with one year ago) as those that are more comfortable.
• Men's feelings of financial security slipped, while women noted improved financial security since last month. However, men still note improved financial security compared with a year ago while women still feel a slight deterioration.
• Comfort level with debt remains mixed. Sentiment slipped slightly this month, as those less comfortable with debt versus last year edged out those more comfortable. At present, 24% are less comfortable while 23% are more comfortable than one year ago.

What the Federal Reserve survey wanted to know boils down to, “how ya doing?”

What U.S. families told the Fed is somewhat disturbing.

While over 60% of people responding said their families were either "doing okay" or "living comfortably" financially, one-fourth said that they were "just getting by" and another 13% said they were struggling to do so.

The report also found the effects of the recession continued to be felt by many households, with 34% reporting that they were somewhat worse off or much worse off financially than they had been five years earlier in 2008 and 34% reporting that they were about the same.

The American Dream

The outlook for the housing market among homeowners appeared generally positive. Many homeowners said they expect home prices in their neighborhoods to increase over the 12 months following the survey, with 26% expecting an increase in values of 5% or less and 14% expecting an increase in values of greater than 5%. Fewer than 10% of homeowners expected house prices in their neighborhoods to decline over the 12 months following the survey.

Many renters seemed to express an implied interest in home ownership The most common reasons cited by renters for renting rather than owning a home were an inability to afford the necessary down payment (45%) and an inability to qualify for a mortgage (29%). Ten percent of renters said they were currently looking to buy a home.

Retirement readiness

The survey results suggest that many households are not adequately prepared for retirement. Thirty-one percent of non-retired respondents reported having no retirement savings or pension, including 19% of those ages 55 to 64. Additionally, almost half of adults were not actively thinking about financial planning for retirement, with 24% saying they had given only a little thought to financial planning for their retirement and another 25% saying they had done no planning at all.

Of those who have given at least some thought to retirement planning and plan to retire at some point, 25% didn't know how they will pay their expenses in retirement.

The Great Recession pushed back the planned date of retirement for two-fifths of those ages 45 and over who had not yet retired, and 15% of those who had retired since 2008 reported that they retired earlier than planned due to the recession.

Among those ages 55 to 64 who had not yet retired, only 18% plan to follow the traditional retirement model of working full time until a set date and then stop working altogether, while 24% expected to keep working as long as possible, 18% expected to retire and then work a part-time job, and 9% expected to retire and then become self-employed.

The full Report on the Economic Well-Being of U.S. Households is available on the Federal reserve website.

It always happens. Conventional wisdom determines that some threat is inevitable, generating much fear and angst. Then someone comes along and says maybe things aren't so dire after all.

It may be happening in the field of retirement planning. In recent years we've been warned that Americans aren't saving enough to support themselves in retirement.

While we should all try to heed the advice to save, some are suggesting the fear is a bit overdone. Ben Steveman, writing in his Bloomberg personal finance blog “Ventured & Gained,” says fear is a poor motivator. Besides, he says, he may not be headed toward a “retirement apocalypse” after all.

“Once retired, Americans will likely find it easier to plot out their budgets. Policymakers and retirement plan providers are working on ways for workers to convert savings into a stream of "lifetime income” that also makes planning simple,” Steveman writes. “While historically low interest rates mean annuities and longevity insurance are expensive now, they should become a better deal when rates inevitably rise.”

Plenty to worry about

Much of the current fear no doubt stems from the poor performance of the stock market in the first decade of the 21st century. Retirement plans heavily invested in stocks barely treaded water for years.

Then along came 2009 and the terrifying plunge in the Dow Jones Industrial Average to below 7,000. While it is true that retirement savers who didn't panic but just rode out the sell-off enjoyed a sharp rebound after mid 2009, the fact remains that years of growth were lost.

Another unsettling factor is how retirement has changed. In previous generations people retired at 65 and started drawing Social Security and a defined benefit pension. They were probably going to die at 70, so they didn't really have to worry about paying for a long retirement.

Today, many retirees have tax-deferred retirement accounts that are finite. The money, supplemented by Social Security and other sources, has to last the rest of their lives. With people now routinely living into their 90s, that's a long time to stretch a dollar.

There's still time

Still, plenty of financial planners say it isn't as bleak as it has been painted. If you are 10 to 15 years away from retirement, you still have time to prepare and there is plenty of free help to advise you through the process.

In 2012 AARP launched a website, Ready for Retirement, featuring planning tools and answers to the more than 11,000 questions AARP has received on the issue. It was a response to an AARP survey that found 65% of people believe they won't have enough to retire.

“As pensions disappear for many American families, preparing for a successful retirement has become increasingly important, and AARP wants to ensure people have the tools they need to save for their futures,” Jean Setzfand, AARP Vice President for Financial Security said at the launch.

More free help is available from the U.S. Department of Labor, which has published an online booklet to offer tips on taking control of your financial life. The important thing is to start now.

“In those approximately 10 to 15 years, you will have time to put more of your paycheck to work in a retirement account,” the agency says. “It will grow, not only from your additional savings, but also from the 'miracle of compounding,' the world's greatest math discovery, according to everyone's favorite genius, Albert Einstein. This is the result of earnings from interest and from investments continually increasing the base amount.”

Define retirement for yourself

It's also important to define for yourself what retirement is going to be. If you hate your job you might not want to hear that you should continue working, but no one says you have to stay in the job you hate.

What if you had a part-time job doing something you love? After age 66 you can earn money without it affecting your Social Security payments. Social Security, income from your investments and a regular paycheck might make for a comfortable retirement, as long as housing and medical expenses are under control.

The take home from all of this, says Steveman, is not to be paralyzed by fear but to start planning and start saving right away.  

At one time Americans planned for a home of their own, or perhaps saved for a new car. When times were good many counted on a nice vacation every year.

These days Americans' financial priorities appear to be more future oriented. A Harris survey finds that 50% of American adults say having enough money for retirement is their top financial goal.

You might expect that shift among the Baby Boom generation, which is already in or nearing retirement. In fact, this thinking cuts along all demographics.

The Great Recession appears to have been the catalyst. While retirement security has risen in importance, home ownerships has declined.

Home-ownership losing its appeal

In 2011, 17 percent said homeownership was their most-important financial goal, compared to just 13 percent in the latest findings.

“People are more in tune with the importance of saving for their retirement years,” says Ted Beck, president and CEO of the National Endowment for Financial Education (NEFE), which commissioned the poll. “Economic recovery is inching forward yet many individuals and families still are experiencing difficulty getting back on track.”

As a result, he says, people are taking comfort in their long-term financial comfort rather than material things. But even people who believe they have their retirement planning under control don't always sleep well at night.

An unrelated survey of investors, commissioned by Legg Mason, found 88% believe they will have enough money to retire but fear their plans could be derailed by a catastrophic event.

"We fear the unpredictable, the catastrophic event that can decimate retirement savings," said Matthew Schiffman managing director and head of global marketing at Legg Mason Global Asset Management. "As a result, we encourage financial advisors and investors to take a realistic approach when planning for retirement. We call it 'realtirement' and it includes trying to anticipate the unpredictable. For instance, have you planned for your long-term living situation?  What if you suddenly need assisted living or even greater care? Are you prepared for that event? We all need to be.”

Finding the money

While the Legg Mason poll measured more affluent investors the NEFE survey found 63% believe “not being able to save enough” is the biggest obstacle to reaching financial goals. Costs of food and gasoline have risen sharply while wages have remained stagnant, so how is it possible to save in today's economy?

The U.S. Department of Labor says fewer than half of Americans have even calculated how much they need to save for retirement, much less put a plan in place to save it.

In 2012 30% of people in the private work force who had access to a defined contribution plan, such as a 401(k), did not put money into it.

The Department of Labor estimates that you will need at least 70% of your pre-retirement income to maintain your standard of living when you stop working. Some may need less but others may need more.

Nuts and bolts

How do you get there? Saving is important but how you invest that savings may be equally as important in the long run.

Personal finance expert Ric Edelman says most people will receive income from a variety of sources in retirement; Social Security, a pension, perhaps an inheritance. Beyond that they need income from a diversified portfolio with some assets that produce income and some that don't.

Edelman suggests what he calls a systematic withdrawal plan (SWP). Instead of withdrawing dividend and interest income you take out the same amount of money each month, reinvesting the dividend and interest income.

But how can you carve out the money from your monthly budget to invest in a retirement account? Personal finance guru Suze Orman says that requires having a budget, with money going into a 401 (k), an Individual Retirement Account (IRA) or a Roth IRA before it ever gets to your checking account.

In other words, saving for retirement should be a fixed expense you have to make each month, just like a mortgage or utility bill.

There's one exception to that advice, however. Orman says before saving for retirement you must pay off all credit card debt.

“Getting out of debt is the most important priority before investing for retirement,” she writes.

If you don't feel like you are prepared to retire, you are hardly alone. A new study suggests most states – maybe the one where you live – aren't ready for you to retire either.

The study comes from the National Institute on Retirement Security (NIRS), which measured all 50 states and the District of Columbia on three criteria; anticipated retirement income; major retirement costs like housing and healthcare; and labor market conditions for older workers.

“We conducted this study to drill deeper and understand better the scope of the nation’s retirement crisis on a state basis,” said Diane Oakley, NIRS executive director. “Now, policymakers can identify the most urgent priorities for addressing the looming financial security challenges of the aging populations in their state.”

Perhaps the biggest issue is the shortfall in retirement savings. But it's not just an issue for the individual retirees. Oakley says it's an issue facing states as well, since they may be forced to deal with more seniors living in poverty.

Social Security isn't enough

“We know that the largest source of retirement income for most Americans is Social Security, but this federal program typically provides only a fraction of what most people need to be self-sufficient,” she said.

States, she says, need to encourage residents to increase their retirement savings. Some have begun to do so but the study suggests a lot more effort is needed.

The data identifies key areas of trouble that affect most or all states. For example, the highest ranking state for workplace retirement plan participation in 2012 had only 54% of private employees participating in a pension or 401(k).

Other numbers are even more sobering. In the previous state-by-state analysis, 14 states had senior households that were facing an increasing cost for housing. In the latest report, 30 states were in that category.

Working longer

If seniors aren't saving enough for retirement that necessarily means they will need to stay in the workforce longer. Many seniors actually want to keep working, at least part-time.

But here the data is also discouraging. Older workers were more likely to be unemployed or to be in low wage jobs in lower-ranked states in 2012 than they were in previous studies.

The study is provided to help policymakers identify areas where they can improve seniors' retirement prospects, and comes at a time when retirement preparedness is a growing concern.

Getting the message

Meanwhile, it appears those currently in the workforce and years away from retirement are getting the message. The latest annual report from Financial Finesse, a provider of workplace financial programs, notes a huge jump in the number of people accessing its information.

The number of employees logging in to the company's Online Financial Learning Center has increased 166% since 2010. Financial concern may be driving the increase since 42% say they are worried they won't reach their financial goals, up from 35% in 2012.

The main takeaway is that employees are becoming a lot more proactive about planning for their financial future, which according to Liz Davidson, CEO of Financial Finesse, bodes well for the long-term.

“Society as a whole is beginning to put more emphasis on financial security and financial education,” she said.

Tax questions

But we still may have a long way to go. This month's report from Bankers Life Center for a Secure Retirement found a majority of middle-income Baby Boomers and retirees lack the financial knowledge they need to navigate retirement.

The biggest gap, the study found, was in knowledge about how tax rates will affect them in retirement. More Americans understand how taxes on lottery winnings work than are aware of taxes on their retirement income.

And when it comes to filing their taxes, most middle-income Americans age 50 and older couldn't identify the main tax deductions that benefit retirees. For the record, they're listed below.

• Blindness is cause for a higher standard deduction
• At age 65 you receive a higher standard deduction
• In some cases, you may claim your parents living outside the household as dependents  

With so many Baby Boomers retiring, or getting ready to retire, retirement savings has been been a hot button topic. Right along with it – especially lately – concern about fees paid on retirement accounts is getting some discussion.

If you have a retirement-related investment account, you are paying something for it. Do you know how much?

Chances are you don't, because the companies managing these accounts don't always put that information front and center. But a new web-based tool – FeeX – is designed to help you find out what you are paying and whether it is too much.

Tech heavyweight

One of the people behind FeeX is Uri Levine, a heavyweight in the entrepreneurial tech world who sold map software provider Waze to Google last year for a cool $1.1 billion. FeeX's position is that some of these fees aren't fair, especially if they aren't readily apparent to the account-holder.

A free sign-up at FeeX.com shows users in graphic terms how much they’re paying for their investments, providing an estimate of the damage those fees will inflict by the time they retire. The tool then enlists help from others in the community to demonstrate how to reduce those fees before they eat too deeply into retirement savings.

“If you don’t know how much you’re paying in fees, you’re probably paying too much,” said Yoav Zurel, CEO of FeeX in this video:

How much is too much?

But since it's reasonable to assume that you're going to pay something, how much is too much? Many financial experts suggest paying more than 1% of your portfolio is over the limit.

This video from the U.S. Department of Labor explains the different kinds of fees you may be paying and how they impact your savings.

Compares your portfolio to others

To help savers avoid excessive fees, FeeX compares portfolios to a practical ideal, based on what other anonymous users are doing. It's a way of grading on the curve, so to speak.

FeeX says this crowdsourcing element allows it to remain objective while helping users rescue their retirements – without sacrificing performance or taking on more risk.

“Again and again we’re seeing that the power of community trumps other more traditional, individual approaches,” Levine said. “Why hold only one piece when together, we can see the whole puzzle?”

The 2013 Investment Company Factbook reports there is $5.4 trillion retirement dollars invested in IRAs, accounting for 27 percent, the lion’s share of U.S. national retirement savings. As a result, Levine says Americans paid $43 billion in fees in their IRA accounts last year alone.

Losers

Who stands to lose if FeeX and other critics of large fees are successful in persuading consumers to be more vigilant? Most likely it's the big brokerage firms that manage these accounts and the large mutual funds, which make up a significant portion of retirement account assets.

CNBC host Jim Cramer recently went on a tirade against the typical company sponsored 401 (k) account, saying “most of them stink,” adding it sometimes feels like the whole system was set up to benefit the financial services industry, not consumers.

"They have high management fees and administrative costs that eat into your returns, and worst of all, they typically offer you lousy choices for your investments and not nearly enough control over them," Cramer added. "The 401(k) business is a racket for the managers who get to charge you these fees.”

Baby Boomers nearing retirement may lie awake at night worrying about their assets. Will they be substantial enough, they may wonder, to see them through retirement?

The question may take on more urgency in the wake of the 2008 financial crisis. A wave of subprime foreclosures and the collapse of the housing market turned an ordinary, garden-type recession into the Great Recession.

In just a few months time -- by March 2009 -- the stock market had plunged, with the Dow Jones Industrial Average falling below the 7,000 mark. While the stock market has recovered nicely in the last five years the fear and trepidation, for many, remains.

Stay diversified

Are there things the retired and near-retired need to do to make sure their portfolios are ready for retirement? Financial advisers have always counseled clients to maintain diversified portfolios and that remains good advice. But Curt Whipple, CEO of C. Curtis Financial Group, points out that few saw the 2008 financial crisis coming and any similar event is also likely to take investors by surprise. So keeping risk under control is paramount.

“Regardless, there are eight indicators that you can focus on that will help you identify whether or not you’re taking too much risk in your portfolio and if your retirement plan is in danger.”

Risk comes with investing. An investment with no risk is either a scam or provides very little return. But for those nearing or in retirement, maintaining a reasonable level of risk may reduce your exposure and allow you to get a good night's sleep.

Too much risk?

According to Whipple, if you lost more than 15% to 20% of your investments' value in 2008-2009 you had too many risky investments. Some self-assessment may be necessary here because each individual needs to be aware of how much risk they are willing to take on.

Generally speaking, the younger you are, the riskier you can be. However, risk is also a personal decision. Whipple says you should make sure you and your adviser are on the same page regarding risk tolerance. That will require your adviser taking the time to explain your investments and how they’re diversified.

When Whipple talks about diversification, he doesn't mean owning stocks in diversified sectors. He says if your portfolio is mostly tied to Wall Street, like stocks and bonds, you aren't truly diversified.

4% withdrawal rate

Financial experts at Fidelity also advise diversification, but also discipline in how asserts are withdrawn from the portfolio during retirement. In a hypothetical example, Fidelity analysts found a 10% per year withdrawal rate drained a balanced portfolio in 10 years. However, withdrawing just 4% per year provided income for 36 years.

“Our analysis clearly shows that the amount of the annual withdrawal rate dramatically raised or lowered the chances of a portfolio lasting for a longer period of time,” the Fidelity analysts concluded. “And the risk of running out of money is a real one. Americans are living longer these days, so it's entirely possible that your retirement could last for 30 or more years.”

Gone before you are

Regardless of how much money is in your retirement portfolio, the rate at which you withdraw it is likely to determine whether it's gone before you are.

Christine Benz, of Morningstar.com, says she polled retired readers about what helped them sleep at night. Thrift was the overriding message, as was discipline in the withdrawal rate. Many of her readers also said they continued to work part-time in retirement, both for the social stimulation and the income generation. As long as they had a job to go to the next morning, they said it was easier to sleep at night.

Ever since a Pew Research Center report found a growing number of parents – 48% – had provided financial assistance to an adult child within the previous 12 months, financial planners have almost universally expressed alarm.

The parents, the argument goes, need to be planning for their retirement, not giving money to children who, at this point, should be living on their own. It's worse, they say, when parents who have already retired are writing the checks.

But Howard Hook, a CPA and certified financial planner with EKS Associates in Princeton, N.J., thinks the stereotype of the mooching offspring taking advantage of an aging parent tends to be overblown. Each situation is different, he says, and parents have to use their best judgment in deciding whether or not to provide a financial helping hand. Sometimes it can be the right thing to do.

“I think clearly a case can be made that helping someone at a younger age, to get them through a rough patch, many times is better than leaving them an inheritance when they are in middle age or later,” Hook told ConsumerAffairs.

Get on the same page

The key, he says is for both parents and child to have a clear understanding of what is being offered. Is it a loan or a gift?

Other questions that need to be asked and answered are what effect will the aid have on the parents' financial condition? If it is a loan, what expectations are there of getting repaid? What does it mean if you don't get repaid – is that going to affect your relationship with your child? If you have more than one child how does it affect the other children in the family who see Mom and Dad lending money to a sibling? That last question is often overlooked.

“The family dynamic can get thrown up in the air,” Hook said.

Two possible outcomes

Hook concedes the whole issue is highly emotional. Parents usually feel protective of their children and hope to make a difference in their lives. But he says it's important to realize that there are two possible outcomes.

“The good outcome is the child being able to say, 'When things were tough I had someone who was able to help me out and assist me financially. I didn't take advantage and it got me over the hump,'” Hook said. “Where it goes bad is when you have a child who continues to need to borrow, isn't responsible enough to pay it back or takes advantage of a parent's emotional feelings.”

There may be more children asking parents for support in the wake of the Great Recession. The country has not fully recovered and the job market only now seems to be tentatively recovering. The financial need – whether perceived or real – seems to be greater now.

“Some of these young people are unable to get jobs,” Hook said. “They're also coming out of college with huge student loan debt that puts a huge financial burden on someone at a very young age.”

Written agreement

If the money is being offered as a gift, there should be a clear understanding of what the money is to be used for. The same is true when the money is extended as a loan. But in the case of a loan, Hook recommends parents and child formalize the process with a written agreement that clearly states the terms.

“What that does is make it real to everybody,” Hook said. “By making it real, at a minimum, it gives everyone a sense of responsibility.”

In his practice Hook says he often sees the other side of the coin – parents who have been asked for help but who refuse, usually he says, out of a fear that they will run out of money in retirement. Hook says in those cases as well, parents should understand that every situation is different.

“If someone wants to loan money to their children and can financially afford it I would never suggest they shouldn't do it,” he said. “We may lay out the pros and cons but ultimately it's their decision.”

In the world of financial services, an annuity is about as boring as it gets. You invest money with an insurance company then get a steady stream of income until you die.

For many, it has the appeal of a defined benefit pension, which in today's world has gone the way of the dodo bird. For seniors worried about having their money last through retirement, safe from market gyrations, annuities have started to look pretty attractive.

Here's how most annuities work: a number of people buy the product from an insurance company, which sends them a monthly check until they die. Some people will die sooner than others. You're betting you'll live longer while the insurance company, which is an expert in the actuarial tables, is taking the other side of that bet.

While most financial planners will point out that the return on an annuities is quite a bit less than other financial instruments, many retirees frankly don't care. After the 2008 financial crisis, they are looking for guarantees – at least as much of a guarantee that the financial services industry can offer. According to an insurance newsletter, sales of most annuity product types enjoyed double-digit growth rates in 2013.

Consider the source

Before buying an annuity it is important ask and answer a few questions. For starters, where are you getting your information about the annuity you are considering? If it is from the insurance company selling it, it's best to look for a second opinion.

Annuities are very profitable products for insurance companies. Not that there's anything wrong with that, but you should understand the person trying to selling you this product has a very strong incentive to get you to sign on the dotted line.

If you have a spouse you will probably consider an annuity with survivor benefits. That means if you die first, you spouse will continue to receive income for the rest of his or her life.

Not without risk

Doing so, however, entails some risk. An annuity with survivor benefits will pay less income each month than one without these benefits. The insurance company must plan for payments until two people die, not one, so the monthly payout is less.

And what happens if your designated survivor dies first? You continue to receive the reduced monthly payout from the annuity, but as John Grobe, a financial consultant specializing in federal government retirees, points out, the money withheld to care for your beneficiary was essentially wasted.

In addition to an annuity with survivor benefits, there are immediate annuities, fixed annuities, variable annuities and equity indexed annuities. An immediate annuity, in which you pay in a lump sum of cash in return for a monthly check, is about the simplest, and according to Certified Financial Planner (CFP) Tim Maurer, probably the best for the largest number of people.

Best of the bunch?

“For Americans who will not be retiring with a meaningful stream of pension income, immediate annuities offer that potential,” Maurer wrote in an article for CNBC.com. “Because an immediate annuity is purposefully consuming both interest and principal to create an income stream, the individual distributions are likely to be higher than anyone could justify taking from a balanced portfolio of investments, where maintenance of the principal balance is often the goal.”

Maurer is least impressed with the equity indexed annuity, which he says is tied in to the rise in the stock market but somehow, without the downside risk. He's not alone in his skepticism.

Wes Moss, a CFP who writes for the Atlanta Journal-Constitution, cautions consumers these products are being sold with commercials describing them as “can't lose” investments. What you should know, he writes, is that you're locking your money up for 10 to 15 years while receiving a rather anemic return – in the neighborhood of 2.5%.

“If those annuity owners had invested wisely and consistently in a balanced S&P 500 and government bond market blend, exposing themselves to some risk, their potential upside for that 25-year period was considerably higher, ranging from 6.5 to 7 percent per year,” he writes.

All this may be true, but it is also clear that for many consumers approaching and entering retirement, economic turbulence in recent years has virtually eliminated their appetite for risk. However, before making any financial decision that commits you long-term, it's a good idea to talk with a trusted and objective financial advisor.

If you talk to someone at or near retirement age about their finances, you'll likely hear a lot of angst about whether or not they have saved enough money. Indeed, studies show a large number of Americans are approaching their "golden years" with little or no savings.

But despite that worry, retirees who have socked money away in an Individual Retirement Account (IRA) appear highly reluctant to spend that money.

The Employee Benefit Research Institute (EBRI) has just completed a study of IRAs for the year 2011. It counted 20.3 million accounts containing $1.456 trillion in assets. Most of the IRAs were classified as traditional IRAs or Roth IRAs.

Required withdrawals

What the EBRI researchers found remarkable is that just over 16% of traditional and Roth IRA accounts had a withdrawal in 2011, including 20.5 percent of traditional accounts. The only reason the percentage was that high, they say, is the law requires individuals ages 70½ or older to make a minimum withdrawal each year.

This percentage was largely driven by activity among traditional IRAs where the individual owners were required to make withdrawals from their tax-qualified accounts.

The IRA has become a major portion of the U.S. retirement system and by EBRI's accounting, makes up about 25% of all U.S. retirement assets. In many cases these IRAs were funded by rolling over an employer-based retirement plan assets after a job change or retirement. Regardless of how the money got there, it doesn't appear to be going anywhere as the account holders appear in no hurry to spend it.

While almost three-fourths of the accounts examined in the EBRI IRA Database were classified as traditional IRAs, over 90% of the accounts with a withdrawal were in that category. Of accounts that had a withdrawal in 2011, 65.1% were owned by those ages 60 or older and 43.8% by those ages 70 or older, while just 10% were owned by those ages 25–44.

Traditional and Roth IRAs

With a traditional IRA, contributions are tax deductible in the tax year they are made. Once deposited, these funds provide another tax break – they can earn income or achieve capital gains without being taxed. Only when the owner of the account withdraws money from the account is there any sort of tax payment. Withdrawals are taxed as ordinary income in the tax year they are made.

A Roth IRA is different because contributions are not tax deductible. However, the earnings – income from dividends or capital gains – are not taxed. Best of all, withdrawals are not taxed and there is no requirement to start making withdrawals at age 70 ½.

That last fact shows up when the EBRI researchers analyzed who was making IRA withdrawals in 2011. A full 90% came from traditional IRAs that have the mandatory withdrawal requirement. Only 6.4% came from Roth IRAs. It's easy to conclude that if traditional IRA account owners weren't required to make a withdrawal, many wouldn't.

Taking advantage of tax break

There aren't many places that your investments can work and grow tax-free, but an IRA is one place they can. Retirees who own IRAs are likely using them as a way to build wealth and – at this point at least – don't need the money to cover living expenses in their retirement.

When the researchers looked at the median withdrawal rate for those taking a withdrawal from their accounts, they found a big difference between those with a traditional IRA and those with a Roth. The rate for traditional IRAs was 6.9%, compared with 40.0% for those taking a withdrawal from Roth IRAs. Remember, Roth distributions aren't taxed while traditional distributions are.

While the median withdrawal rates suggest that many individuals are highly likely to maintain the IRA as a source of income throughout retirement, the researchers say further study is needed to see if these people are keeping their withdrawal rates at these levels as they get older. But at this point, retirees who have saved apparently don't feel the need to tap those savings.

Baby boomers saving for retirement are often confronted with a confusing array of financial choices to secure their future. That security can depend in part on making smart choices.

If you haven't saved enough for your particular point in life you may feel added pressure to score higher returns. That's when it's easy to make mistakes, choosing a risky investment or, worse still, falling for a scam.

Even under the best of circumstances aging Boomers are likely to make “stupid” mistakes with their nest eggs, according to Lewis Mandell, professor emeritus of finance and managerial economics in the University at Buffalo School of Management.

When you “get stupid”

Mandell's latest book, “What to Do When I Get Stupid: A Radically Safe Approach to a Difficult Financial Era,” serves as a warning to the Baby Boom generation. It lists many of the mistakes this aging generation makes and offers the reasons why.

For the average person, says Mandell, financial reasoning usually peaks around age 53 and then declines sharply, especially after age 70. At that age people are more vulnerable to pitches for risky investment schemes and serious lapses of financial judgment.

To make things even more dicey for seniors, as they age they become more confident in their own financial judgment, even though the reverse is true. It's bad enough that markets have been so volatile over the last decade, seniors must also guard against their own poor decisions, he says.

"Radically" conservative

Mandell argues for, by his own admission, a radically conservative approach when it comes to seniors investing their assets. One of the best places to put it, he says, is in a home that is owned free and clear, unincumbered by a mortgage.

“A fully paid, age-in-place home may be the single best investment we can make,” Mandell said. “By staying at home, we can keep ourselves or our loved ones out of expensive nursing homes, which can quickly deplete our assets.”

Mandell also stresses the importance of securing a lifelong income, well before financial reasoning declines. Investments in dividend-producing blue chip stocks and bond funds are not conservative enough for Mandell.

Champion of annuities

To make investments idiot-proof, he recommends a single-premium immediate fixed annuity, even though annuities have low returns and high fees. But the money gets locked up while producing a modest income stream and won't get lost investing in the latest pyramid scheme. A little income, he argues, is better than no income.

In addition, the book re-evaluates common practices, such as retaining a financial advisor or moving to a continuing care retirement community, and casts doubt on the effectiveness of long-term care insurance. And for Boomers, the time to consider these issues is now.

“It is therefore wise of us to take future financial decision-making out of our own hands while we still have the mental capacity to do so,” Mandell writes.

A number of seniors and their financial advisors might question Mandell's emphatic and somewhat rigid advice to give in to inevitable financial incompetence. However, if his book serves only as a warning to approach late-in-life financial management with extreme care it may serve as a useful public service.

Elder abuse

A big part of the problem, of course, are the high-pressure sales pitches that are often directed at seniors. The damage these schemes and scams have done to older consumers has been well documented.

For example, a 2009 survey by AARP found that 10% of Americans over age 55 had accepted an invitation to attend a free lunch or dinner at which there would be an investment seminar or presentation. These “free lunches” are notorious for pushing risky investments.

Seniors are often victims of the so-called “affinity scam,” in which an individual in the victim's church or civic group offers a “can't miss” investment opportunity. Because the victim knows and trusts the offerer, they throw caution to the wind.

A recent study by Investor Protection Trust found 20% of Americans 65 or older had “been taken advantage of” in the purchase of an investment, either through high fees or outright fraud. 

In his State of the Union speech President Obama offered up a proposal for a new retirement savings vehicle for workers at companies that do not offer a 401(k) plan. Called “MyRA,” the President described it as a new type of savings bond that encourages folks to build a nest egg.

“MyRA guarantees a decent return with no risk of losing what you put in,” Obama said. “Offer every American access to an automatic IRA on the job, so they can save at work just like everyone in this chamber can.”

Short on details

The President's speech was short on details about how MyRA would work, but his assessment that it would carry no risk suggests it would be more of a bond than an equity-based investment vehicle. Right now, the return on bonds is very low -- less than 2%.

Currently nearly all employees have access to a retirement savings account, whether their employer offers one or not and it is not yet clear whether the President's proposed MyRA would be an improvement over that. The current vehicle is called an Individual Retirement Account (IRA) and has been around since 1975.

The traditional IRA is an account that can be invested in many different types of assets, including stocks, bonds – even certificates of deposit. Besides serving as a retirement nest egg, it is also a tax shelter. Unlike a savings bond, it can lose value when asset values fall.

Tax shelter

Money deposited into an IRA is exempt from taxation the year it is deposited. But the government eventually gets its money, as all withdrawals are taxed as income. However, as the investments grow over the years, those earnings are not subject to taxation. That has the advantage of allowing your money to grow faster.

But there are strict rules governing IRAs, including how much you can contribute in a given year. First, you can contribute no more than you earn. For example, if you are a student working part time and earn $3,500 during the year, you could contribute no more than that to your Traditional IRA.

Otherwise, the limits are a bit higher. For 2013 and 2014 the Internal Revenue Service (IRS) has set the contribution limit at $5,500 per taxable year, or $6,500 for those age 50 and over. That money is deducted from your gross income and can be invested for your future. Any transactions in the account, including interest, dividends, and capital gains, are not subject to tax while still in the account.

You're in control

How the money is invested is up to you. Most people put their money in mutual funds. If you open your account with an online brokerage, for example, you could invest in mutual funds, Exchange Traded Funds (ETFs), individual stocks, bonds, or certificates of deposit – whatever products the brokerage offers. If you know little about investing you would either need to educate yourself of find a trusted, objective financial adviser to help you.

When you withdraw money from an IRA the full amount of the withdrawal is taxed as though it is earned income. For example, if you have an effective tax rate of 17% and withdraw $5,000 from your IRA in a given year, you would have to pay $850 of that to the IRS in taxes.

If you make a withdrawal before you are 58 and a half years old you not only have to pay tax on the withdrawal but a 10% penalty as well.

Required withdrawals

At age 70 and a half you must begin making regular withdrawals – and paying the tax – from your traditional IRA, called required minimum distributions. Like anything involving the tax code, it can be complicated figuring out what that is.

According to the IRS the required minimum distribution for any year is the account balance as of the end of the immediately preceding calendar year divided by a distribution period from the IRS’s “Uniform Lifetime Table.” A separate table is used if the sole beneficiary is the owner’s spouse who is ten or more years younger than the owner.

Sometime in the early 1990s there was a change in the American workplace. Companies began phasing out their defined pension plans for employees and began phasing in employee-directed retirement savings plans, most notably the 401(k).

The change had advantages and drawbacks. The advantage is that financially-savvy employees could decide how their retirement funds were managed and choose how much risk they were willing to tolerate. The downside was that not all employees were financially-savvy.

Instead of receiving a set benefit check from their employer's pension fund for the rest of their lives, most retirees now have to figure out how to make their retirement savings last. Some, admittedly, have a much more challenging task as surveys show an alarming number of near-retirees have put away far too little for their golden years.

Not enough savings

A 2011 survey by Wells Fargo found a majority of middle class Americans – 53% -- say they “need to significantly cut back on spending today to save for retirement.” Americans have saved, on average, only seven percent of their desired retirement nest egg– a median of $25,000 in retirement savings vs. a median retirement goal of $350,000. Three in ten people in their 60s have saved less than $25,000 for retirement, possibly indicating they will rely heavily on Social Security.

For those who have managed to save a retirement nest egg, the challenge of managing it in retirement may be much greater than the challenge of saving. To produce income the funds need to be put to work. But investing – anything beyond bank CDs – involves risk. As people reach retirement they tend to be less tolerant of risk.

"Generating retirement income is comparable to that of a NASA engineer trying to land a spaceship on Pluto," said Eleanor Blayney, consumer advocate at the Certified Financial Planner Board of Standards. "Everything may be optimized and perfectly calculated to give the highest probability of success, but without mid-course corrections along the way, the likelihood of achieving the goal – of landing the ship or generating enough income to live on during retirement – is very low."

Tough questions

Blayney says there are a number of questions retirees and near-retirees need to be asking themselves. For example, do you have a retirement spending plan? It's not just what you save – but the amount you spend, and the types of those expenses – that will determine whether you will have enough to live on in retirement.

The questions get harder from there. Next, you have to decide how to invest your savings and how to spread those investments around and here you have to be both smart and careful. Blayney says just because you need income in retirement does not mean it's time to load up on fixed income or high-yield securities. A sizeable allocation to growth assets is as important as ever, she maintains.

Once the funds are allocated, you can't just forget it. When you are invested you must pay attention to the economy as well as the market and be ready to make course corrections when conditions dictate.

If that weren't enough retirees have to decide how and when to withdraw funds from a tax-deferred savings account when the law says you must start making withdrawals and paying taxes.

On-going decision making

"The reality is that generating retirement income requires ongoing decision-making over the life of the retiree and there is no one solution or product that will be good for the duration," Blayney said.

If you are short of your savings goal the important thing is not to panic because that's usually when people make mistakes. One of the biggest mistakes is to plunge into a questionable investment – or outright scam – because it's promoter promises big returns.

The risk-to-reward ratio is very real. An investment with a high reward always carries a higher risk. The reason a CD is about the lowest return one can get is there is no risk.

The move from defined benefit pensions to self-managed retirement accounts essentially told employees, “you're on your own when it comes to your retirement planning.” For some that has worked out just fine. But it's a simple fact that not everyone has the ability or the willingness to take on that task.

It's best, then, for those people making a retirement plan to seek the advice and assistance of a trusted financial advisor, not just to maximize retirement saving during their working years but devising a plan for making the money last.

There may be many reasons that the economy has sputtered in the five years since the financial crisis of 2008. Most people's incomes haven't risen very much, there isn't as much available credit and perhaps there may be a demographic reason as well

For decades the Baby Boom generation, which came of age in the 60s, entered the work force in the 70s and started families and moved to the suburbs in the 80s, has been a significant driver of the U.S. economy. This group earned a lot and spent a lot.

The onset of the Great Recession coincided with the first wave of the Boomers entering their 60s. They started worrying about retirement and their spending priorities changed. In 2012 the National Center for Policy Analysis (NCPA), a think tank, studied how Boomers spend their money. The main point of the report is that Boomers still aren't saving enough for retirement. But where they spend their money is eye-opening. 

Different spending priorities

Using data from the Bureau of Labor Statistics’ Consumer Expenditure Survey, researchers compared the pre-retirement spending habits of today’s middle-aged workers -- 45 to 54 years old -- and today’s older workers -- 55 to 64 years old -- with the spending habits of those same age groups 20 years ago. It turns out that, after adjusting for inflation, Boomers are earning what their age group did two decades ago. But how they spend that money is very different.

The report found that from 1990 to 2010 Boomers increased spending the most for education. Spending rose by 80% for 45- to 54-year-olds and 22% for those 55 to 64. The next largest increase in Boomer spending was for health care.  Just to be clear, Boomers weren't educating themselves -- they were paying for their children.

If you are writing checks to universities and hospitals, that leaves less to spend on consumer goods and services that can stimulate broad economic growth. The NCPA study found Boomers aren't spending more on entertainment, like movies and restaurant meals. They spend less on food, household furnishings, automobiles and clothing, all of which can stimulate the economy when sales rise. Clothing saw the steepest decline with expenditures falling 42% for 45- to 54-year-olds and 70% for 55- to 64-year-olds.

With the economy getting very little traction these last five years the children of Boomers increasingly turn to their parents for financial support, which places an additional drain on disposable income. A recent survey from the National Endowment for Financial Education found that more than half of parents are helping to support their adult children. Among parents of 18-to 39-year-old children, 59% of parents are providing financial support to adult children who are no longer in school.

Even thought Baby Boomers aren't saving what many financial experts believe is enough, there is evidence to suggest that they are trying to save money. The money they put into retirement accounts is money they aren't spending to stimulate the economy.

Boomer flight in NYC

AARP of New York State sees this outsized Boomer impact on the economy growing, particularly in New York City. It warns of what it calls “Boomer flight,” with a mass exodus of Boomers leaving the city and taking their retirement funds with them. Pennsylvania and other nearby states with lower taxes and attractive countrysides are luring the Boomers.

An AARP survey of New York City's voters 50 and older in November found more than half of Boomers said they plan to leave the city when they retire. After analyzing the numbers AARP estimates 762,087 Baby Boomers -- roughly 53% -- are expected to leave and take anywhere from roughly $12 to $21 billion with them.

That, the group says, should be a sobering thought for the incoming de Blasio administration. In a note of irony, it observes that the Boomers who plan to leave the city in the future are largely responsible for electing the incoming mayor, with de Blasio getting 75% of the Boomer vote in exit polls.

"Literally, the group that elected Bill de Blasio mayor is saying they are leaving the city to retire elsewhere," said Beth Finkel, Director AARP New York.  

Low- and moderate-income workers can take steps now to save for retirement and earn a special tax credit in 2013 and the years ahead.

According to the Internal Revenue Service, the saver’s credit helps offset part of the first $2,000 workers voluntarily contribute to IRAs and to 401(k) plans and similar workplace retirement programs. Also known as the retirement savings contributions credit, the saver’s credit is available in addition to any other tax savings that apply.

Still time to act

Eligible workers still have time to make qualifying retirement contributions and get the saver’s credit on their 2013 tax return. People have until April 15, 2014, to set up a new individual retirement arrangement or add money to an existing IRA for 2013.

However, elective deferrals (contributions) must be made by the end of the year to a 401(k) plan or similar workplace program, such as a 403(b) plan for employees of public schools and certain tax-exempt organizations, a governmental 457 plan for state or local government employees, and the Thrift Savings Plan for federal employees.

Employees who are unable to set aside money for this year may want to schedule their 2014 contributions soon so their employer can begin withholding them in January.

What to do

The saver’s credit can be claimed by:

• Married couples filing jointly with incomes up to $59,000 in 2013 or $60,000 in 2014;

• Heads of Household with incomes up to $44,250 in 2013 or $45,000 in 2014; and

• Married individuals filing separately and singles with incomes up to $29,500 in 2013 or $30,000 in 2014.

Like other tax credits, the saver’s credit can increase a taxpayer’s refund or reduce the tax owed. Though the maximum saver’s credit is $1,000, $2,000 for married couples, the IRS cautioned that it is often much less and, due in part to the impact of other deductions and credits, may, in fact, be zero for some taxpayers.

A taxpayer’s credit amount is based on his or her filing status, adjusted gross income, tax liability and amount contributed to qualifying retirement programs. Form 8880is used to claim the saver’s credit, and its instructions have details on figuring the credit correctly.

Millions saved

In tax-year 2011, the most recent year for which complete figures are available, saver’s credits totaling just over $1.1 billion were claimed on nearly 6.4 million individual income tax returns. Saver’s credits claimed on these returns averaged $215 for joint filers, $166 for heads of household and $128 for single filers.

The saver’s credit supplements other tax benefits available to people who set money aside for retirement. For example, most workers may deduct their contributions to a traditional IRA. Though Roth IRA contributions are not deductible, qualifying withdrawals, usually after retirement, are tax-free. Normally, contributions to 401(k) and similar workplace plans are not taxed until withdrawn.

Special rules

Other special rules that apply to the saver’s credit include the following:

• Eligible taxpayers must be at least 18 years of age.

• Anyone claimed as a dependent on someone else’s return cannot take the credit.

• A student cannot take the credit. A person enrolled as a full-time student during any part of 5 calendar months during the year is considered a student.

Certain retirement plan distributions reduce the contribution amount used to figure the credit. For 2013, this rule applies to distributions received after 2010 and before the due date, including extensions, of the 2013 return. Form 8880 and its instructions have details on making this computation.

Begun in 2002 as a temporary provision, the saver’s credit was made a permanent part of the tax code in legislation enacted in 2006. To help preserve the value of the credit, income limits are now adjusted annually to keep pace with inflation. 

Retirement is everywhere these days. And no wonder, the Baby Boom cohort is either 65 years old or getting close. Financial services companies fill the TV airwaves with commercials, hoping to entice these graying citizens to buy their products.

But these commercials are not all completely self-serving. Some raise issues that people contemplating retirement should think about. The first, and maybe the most important, is what retirement actually is.

For people who have spent most of their working lives getting up early, making a daily commute and sitting in an office 40 hours a week, retirement first and foremost means not having to do that anymore. But it begs the question, if you aren't doing that, what will you be doing?

Hopefully, it's something productive because, if it is, you might be able to earn some income from it. It's work, but work on your terms.

Warren Buffet long ago reached the age at which he could retire but he probably didn't slow down enough to even think about it. He was too busy buying companies and adding to his billions.

Keep working

The point is that just because you hit 65 and quit your day job, you don't stop working altogether. If you find something you enjoy doing, you keep going. It not only gives you a reason to get up in the morning it supplements your retirement income. And with people routinely living into their 90s, that's important.

Jack Williams is a clinical psychologist in State College, Pennsylvania. He has suggested that you should look at retirement simply as a career change. 

“Retirement is a career change because it has all the practical hallmarks of a career change, such as the need for planning, the need to learn about your own strengths and priorities, the need for networking, the change in income, the need to try out new things, and the choice of a new direction,” he writes in his blog. “To have a thriving retirement, you need to be doing something that you believe in and that feels important to you.”

If you have all the retirement income you think you will ever need – but who, besides Buffet, does? – you can choose a new vocation regardless of whether it brings compensation or not. But for most people entering retirement, income is very important.

Sources of income

That brings us to another critical consideration. How will you support yourself during your golden years? If you have a new retirement job or career you will get some income but probably not as much as you earned pre-retirement. Other sources of income include Social Security, your retirement savings and investments, and any pension your previous jobs provided.

You can draw Social Security beginning at age 62, though most financial planners frown on drawing it before age 66 and many would prefer that you delay it until age 70. Here's why: your monthly Social Security payment is proportionately increased by two-thirds of one percent for every month you delay taking Social Security after reaching full retirement, up until age until age 70.

Actuaries have crunched the numbers and figured out how much money you should receive between your retirement and your death. If you start drawing it at 62, those payments are smaller because they are spread out over more years. If you wait until age 70, they're larger. It's simple math. Social Security provides an online calculator to help you figure it out. 

But while the total amount of money you will receive over your lifetime may be close to the same, regardless of when you start receiving it, you may need those larger payments later in life, when age-related infirmities may reduce your ability to earn additional income, or your retirement savings and investments begin to run low.

If you draw Social Security at 62, make sure you can live on it. The government penalizes you by reducing your benefit for every dollar of income you earn over a certain limit.

Stay healthy

The third critical consideration is health. Health in old age is not just a quality of life issue but also an economic one. According to a recent retiree health care costs estimate calculated by Fidelity Benefits Consulting, a 65-year-old couple retiring in 2013 is estimated to need $220,000 to cover medical expenses throughout retirement. 

You might not be able to prevent some diseases but many health conditions, especially those associated with aging, are preventable. Before reaching retirement age take steps to improve your health by shedding excess pounds, eating a balanced and nutritious diet and getting plenty of exercise. Maintain that lifestyle once you enter retirement.

If you are getting ready to finally retire you have probably been crunching numbers, debating relocating and planning your budget – all good steps. But despite the best of intentions, many seniors start off their golden years with a blunder or two.

Avoiding these speed bumps will make things go more smoothly, not to mention helping you sleep better at night. So here's a heads-up.

Playing it too safe

The first mistake might not seem like a mistake at all, which is why some people make it. It's being a little too careful with your money. But careful is good, right? You've socked it away in CDs and Treasury bonds, where it's safe.

A little too safe. There is such a thing as the risk-reward ratio and retirees need some reward if they want their money to last through their retirement. That means taking a little bit of risk – not too much but enough to provide an acceptable return.

Most financial planners will tell you that you need to keep a healthy portion of your portfolio in stocks. Yes, stocks have their ups and downs but over time they have tended to go higher. Investing in stocks that provide some kind of dividend can add a little income to the mix, carrying you through times when the market is down.

The tricky part of avoiding this mistake is finding the right mix between security and growth potential. You shouldn't hesitate to seek advice from a trusted, objective financial advisor, and maybe even get a second opinion.

Paying too much in taxes

Another mistake is not keeping an eye on your tax bracket. You may have paid your fair share of taxes during your working career but your income should be less – and you should pay less in taxes – in retirement. But there are some things that bump you into a higher bracket.

If you are earning money, then paying more in taxes shouldn't be a problem. But if your mandatory IRA and retirement account withdrawals are bumping you higher, that's going to hurt.

Instead of waiting until you are 70 1/2, when the government starts requiring you to make withdrawals, start pulling money out, and paying taxes on it, sooner. That doesn't mean you have to spend it, it only means you have to move it out of your tax-deferred account. After paying the tax, put the money into a savings account or invest it until you need it.

Helping the kids

Many Baby Boomers are retiring at a time when their children are struggling through the hardships associated with raising their own young families. Young people have taken the brunt of the Great Recession, with a tougher job market and less generous salaries and benefits when they do find work.

Often they turn to Mom and Dad for some help. Sometimes parents see their children struggle and volunteer to open their checkbook.

Helping your children is okay, financial planners advise. But just make sure your retirement needs come first and you can really afford it.

Things that could be mistakes

Some financial planners list taking Social Security too early and paying off a mortgage balance as mistakes while others disagree. Yes, delaying Social Security until you are 70 will result in monthly payments that are eight percent higher. However, payments are based on actuarial tables and on average, people will draw the same total amount whether they start drawing at 62 or 70.

If you expect to continue earning income through retirement, and expect to be less reliant on Social Security, early enrollment might not hurt that much. If you expect Social Security to be the major part of your retirement income as you age, then those counseling an age 70 draw date are probably correct.

When it comes to paying off your mortgage in retirement, there is no hard and fast rule. It might make sense but, if you can put the money into investments that provide a high return, it might not.

Which brings us to the last mistake many retirees make – not seeking and listening to advice. Writing in the Wall Street Journal recently, retired Boeing executive Henry Hebeler says not thinking you need professional advice is high on the list of retirement mistakes Boomers are making, and he speaks from experience.

“Having been retired now for almost 25 years and with many friends in their 80s, I know plenty of mistakes that we’ve all made when we were preparing for retirement,” he writes. “Of course the most common is not saving enough, and that’s a problem that is going to be facing the majority of Boomers. Another is thinking that you don’t need some professional advice, either because you think you know enough yourself or because you don’t think you need a second, objective, opinion.”

The statistics about retirement savings are pretty sobering. The Employment Benefit Research Institute has found that more than half of Americans have saved less than $25,000. AARP reports that half of Baby Boomers doubt they'll ever be able to retire. 

The problem of little or no retirement savings is a front-burner topic. What is less discussed is how to make the money you have saved for retirement last. Since you don't really know how long you will live you don't really know how much you'll need. But Jane Bennett Clark, senior editor at Kiplinger Personal Finance, says you'll probably need more than you think.

“With increased longevity you could end up living 25 to 30 years into retirement so you really can't afford to ignore the effects of inflation on your buying power of your retirement savings over several decades,” Clark said. “So in order to beat inflation you have to invest some of your savings for growth and that means investing in stocks.”

Rule number one

In a recent article she profiled a couple who retired around the time the bottom fell out of the economy in 2008. They watched in horror as the value of their retirement account portfolios plummeted. However, they held on and didn't sell, meaning they caught the upside when the market bottomed in March 2009 and the Dow Jones Industrial Average more than doubled. Her number one rule? Don't dump stocks. 

That's not the same as the “buy and hold” strategy, however. If a fund or individual stock is performing poorly there's no reason not to sell and move the money into another fund or stock. Just don't panic and sell into a bear market because they are usually followed by bull markets.

Clark thinks a good general guideline for people entering retirement is to keep a ratio of 40% stocks to 60% fixed income. With interest rates and bond yield tiny over the last five years dividend stocks have increased in popularity. These equities pay shareholders a dividend each quarter, many the same or much higher than bond yields. But Clark sees some dangers.

Be careful with dividend stocks

“Dividend stocks are becoming expensive so you have to be picky about what you're getting,” she said. “Also, stocks can fall when interest rates finally do rise.”

And “expensive” doesn't strictly apply to the price, but rather the price in relation to earnings. An “expensive” stock is one that sells for a high multiple of its earnings per share – a multiple that might not be justified by its prospects for future growth.

Figuring out what's expensive and what isn't takes some time and effort, which is why most retirement accounts are made up of mutual funds. These funds are professionally managed with fund managers deciding when to buy and sell the stocks that make up the fund.

Stock guru Jim Cramer recently criticized the typical 401(k) plan for what he called a lack of attractive options for investors. He has always been a a proponent of owning individual stocks – but only after the investors takes the time to learn the ins and outs of investing.

Are you a stock picker?

“I don't think most people have the interest or the time or knowledge to track individual stocks and be stock pickers,” Clark said. “If you like to do it, great. But I think mutual funds are the logical choice for most people.”

Even if your investments are exclusively in funds, Clark says some are conservative and some are more growth oriented. She suggests spreading your money around in both types, in what she calls the bucket system.

“You invest enough money in liquid, conservative accounts to cover several years worth of basic costs,” Clark said. “Then you might create another bucket with investments that give you more potential for yield and that would cover some of your discretionary expenses. And then a third bucket would be for growth investments.”

Stepping up savings

As Baby Boomers approach retirement and worry that they don't quite have it covered, are there things they could be doing to help them sleep better at night?

“The obvious answer is they can be saving as much as possible, including taking advantage of their catch-up contributions to their 401(k) and Roth IRA,” she said. That's a really good opportunity to pile money into their tax deferred accounts.”

Individuals who are 50 years old at the end of the calendar year can make extra “catch-up” contributions to their retirement accounts. The Internal Revenue Serice (IRS) explains it here. 

Chances are you and your spouse do lots of things together and have throughout the time you've been married. If you are close in age you may be thinking of retiring together.

Good idea? It depends on who you ask. The experts at Investopedia suggest there are emotional, as well as financial reasons couples shouldn't end their careers at the same time. Financially, it may benefit the couple if one person works longer. It increases the amount of Social Security benefits they are entitled to receive as a unit. 

Emotionally, joint retirement means two people who have led separate lives during the workday wake up one morning and find they are together the whole day. Sometimes, that can be a bit of an adjustment.

Learning to live with one another

Earlier this year a British study found that when a couple retired at the same time it put a strain on their relationship. Eighty percent confessed they didn't have any of the same hobbies or interests and 40% admitted they had to learn how to live with each other again. 

"It is easy to believe that, when couples reach retirement, they might encounter all sorts of problems with their relationship,” said Stacey Stothard, Corporate Communications Manager at Skipton Building Society, which conducted the research. “For the previous 30 or 40 years, they will have been set in a routine – going out to work, juggling looking after the children and pursuing their individual interests. Day to day, they might only have had an hour or two of quality time together, with the rest of their day allocated to other commitments. Suddenly, when faced with the prospect of spending 24 hours a day together, seven days a week, without work or the children to talk about, couples can find it hard to adjust."

The adjustment may be made easier with some planning. Planning for retirement, after all, isn't all about dollars and sense. Timing, and the interaction between two individuals, is a big part of it.

Similar to becoming parents

“The transition into retirement, in some ways, is like the transition into parenthood,” said Angela Curl, an assistant professor in the University of Missouri (MU) School of Social Work. “When couples prepare to become parents, they do a lot of planning for the future. They spend time thinking, ‘How might our relationship change? How will our lives be different, and what do we need to do to accommodate this life change?’ It’s the same way with retirement. It affects so many different areas of life, and by preplanning, couples can make retirement a more positive experience.” 

Curl examined data from the Health and Retirement Study, which included information from married couples who were 45 years of age and older and worked full or part time. She discovered that when one spouse planned, the other spouse also planned. Even though husbands planned more often than wives, the spouses influenced each other. She also was able to separate myth from reality.

Get real

“On commercials, retirement is portrayed as a life of golfing, relaxing or walking along beaches together,” Curl said. “Sometimes individuals have unrealistic expectations about what retirement will be like. Individuals can envision retirement one way, but if their spouses don’t envision retirement the same way, it can be problematic. Talking to your spouse about retirement before you leave the workforce is important in reducing conflict.”

Curl found that upper income men tended to be most active when it comes to planning for a retirement, both in terms on finances and the social transitioning out of the workforce. She thinks employers can do a better job of helping women and minorities plan for successful retirements.

“Individuals need to plan for retirement in more concrete ways. If individuals want to volunteer when they’re retired, they might ask themselves where and how often they will volunteer. Having specific plans and steps to follow will help individuals enter retirement with more success.”

And talking with your spouse about your retirement plans – and theirs – may also increase the chances for a successful retirement, both financially and emotionally.

Many Baby Boomers who began their careers in the 1970s were enrolled in what is known as a “defined-benefit” pension plan.

If you began your career in the 1990s or later, chances are there was no mention of a pension when you started your job. Rather, the HR manager probably gave you forms for the company's 401(k) plan.

There is a big difference between the two and heated arguments over which is better. A pension is a lot like Social Security. The employee pays in a set amount – or has a set amount paid in her behalf – and then when she retires she receives a defined payment as long as she lives.

With a 401(k) plan, the employee pays a set amount of his earnings each month into a tax-deferred savings plan. The company may or may not match the amount. The money is invested in equities – usually mutual funds – that hopefully grow over time, providing the beneficiary significant retirement savings.

Employers favor 401(k) plans

It's no secret that large employers prefer the 401(k) over pensions. Some high-profile companies that have declared bankruptcy in recent years have cited pension obligations as one reason for their financial difficulty.

Companies and municipalities that still have pensions have struggled in recent years to keep them adequately funded. Pensions are required to maintain certain levels of liquidity to meet current and future obligations. When cutbacks result in fewer employees contributing, it can lead to a shortfall, or what is known as unfunded or under-funded pension liabilities.

A 2012 study by Morningstar found that 21 state governments reported pension funding ratios that fell below 70%, which the analyst firm considers the threshold for a fiscally-sound pension system.

So a 401(k) system, which gives the employee a greater degree of control, is the answer, right? Not everyone agrees. A paper from the Economic Policy Institute (EPI), an independent, nonprofit think tank, makes the claim that the movement to 401(k) plans has left the vast majority of Americans unprepared for retirement. 

Not a pension replacement

“401(k)s were never designed to replace pensions for most workers,” said EPI economist Monique Morrissey, co-author of the paper. “They serve primarily as a tax shelter for high earners. The 401(k) revolution has been a disaster, yet some policymakers are calling for cuts to Social Security, which will be the only significant source of retirement income for most Americans -— if they are able to retire in the first place.”

The EPI paper says wage earners in the top 20% accounted for 72% of total savings in retirement accounts in 2010. They were the only income group that had more than their annual income saved in these accounts.

At the same time, Morrissey says participation in employer-based retirement plans by workers age 25-61 declined over the past decade, from 52% in 2000 to 45% in 2010.

Not cut-and-dried

But another group, the Employee Benefit Research Institute (EBRI), says the answer is not so cut-and-dried. Its detailed analysis finds there is no single answer because it says many factors affect the ultimate outcome: interest rates and investment returns; the level and length of participation; an individual’s age, job tenure, and remaining length of time in the work force; and the purchase price of an annuity, among other things. 

But all things considered, it says it tends to lean toward the 401(k).

“If historical rates of return are assumed, as well as annuity purchase prices reflecting average bond rates over the last 27 years, and real-life job tenure experience, EBRI’s modeling results show a strong advantage for voluntary-enrollment 401(k) plans over both the final-average defined benefit plans and cash balance plans,” said Jack VanDerhei, EBRI research director and author of the study.

However, by reducing the assumed returns of a voluntary plan, EBRI concedes these plans can lose their comparative advantage, particularly among lower-paid employees.

Morrissey maintains retirement disparities have grown because the tax policies governing retirement accounts favor high income families and because many 401(k) participants cannot afford to contribute enough to their plans. By contrast, she says most workers in defined-benefit pensions are automatically enrolled and, in the private sector, are not required to contribute to these plans.

Everyone, if they live long enough, will look forward to retirement but not everyone is at the same place when it comes to building a retirement strategy. What is right for a 60-year old Baby Boomer is probably not right for a 40-year old Gen-Xer.

Even among people the same age group, there is no such things as a one-size-fits-all approach to retirement planning. And it's definitely different for Boomers and Gen-Xers. Michelle Perry Higgins, a principal at Maloon Powers Pitrie & Higgins California Financial Advisors, in San Ramon, Calif., says Boomers should be focused on aligning their financial plans with their retirement plans.

“Having a strong financial plan in place, well in advance of retirement, will answer the questions as to when they will be able to retire and what retirement will look like for them,” Higgins said.

After all, the greatest retirement plan in the world is worthless if there isn't a solid financial plan to back it up. It serves as sort of a reality check.

Shows what you need to do

“For example, if a Boomer’s financial plan shows that they have not saved enough into their retirement plan, then they should decrease current spending and increase retirement savings,” Higgins said. “Similarly, if their financial plan dictates that downsizing their home needs to occur, then they should take action to ease the stress of that transition.”

What should be in the financial plan? For Boomers, it's important to have a well-diversified portfolio at this point. Their time line is much shorter, and shrinking.

“They definitely took the brunt of the Great Recession,” Higgins said. “For those who had strong defensive barriers, bonds and cash equivalents, it was easier to sleep at night when the equity markets were having tantrums. For all Boomers, maxing out their 401(k) pre-tax allowable limit, along with their catch-up is usually a must on my list.”

The oldest Boomers are already at retirement age. The youngest are turning 50. They still have some flexibility in planning their retirement but should take advantage of that extra time.

Gen-X

Gen-Xers, those in their late 40s and younger, have an advantage of even more time. Higgins recommends members of this generation get serious about eliminating debt – paying down credit cards, student loans, car loans and living in a home with a mortgage they can comfortably afford.

Of course, many Gen-Xers still have a lot of family responsibilities that have an impact on finances.

“College costs have increased dramatically and retirement for Gen-Xers will only be attainable by adequately preparing for their children’s higher education expenses,” Higgins said. “Without good preparation, paying those college costs could delay retirement for the parents. Instead of being overwhelmed by college expenditures and ignoring what will be coming, Gen-Xers need to address it head on.”

That means sticking to budgets and putting away money for both retirement and education – sometimes hard to do at the same time. Over the last several years much of the coverage of retirement issues has focused on Boomers, but the generation behind them has quietly been working on a plans of their own, and going about it a little differently.

High on Roth IRAs

“Gen-Xers seem to have latched on to Roth IRAs, which are a wonderful savings vehicle, overall,” Higgins said. “One of the shortcomings of this type of savings plan is that the Roth limits are not as high as the 401(k) federal limits.”

Unlike a traditional Individual Retirement Account (IRA), contributions to a Roth IRA are not tax deductible when you make them. But unlike a traditional IRA, withdrawals are not taxed when you start making them in retirement. That allows the investments in the account to grow and provide tax-free income in retirement.

Higgins says she also sees Gen-Xers flocking to mutual funds, which offer a variety of investment options. And many are making every penny count.

“Gen-Xers are smart and have gravitated toward no-load funds which, in my opinion, is a prudent move,” she said.  

With each passing year you get closer to retirement. So, it would make sense that each year you squirrel away a little more as that time approaches, right?

You would think so, but a new report from Bankrate.com says just 18% of working Americans are saving more for retirement now than they were a year ago. Additionally, 17% are actually saving less and 54% are saving about the same amount.

Bankrate commissioned similar surveys in August 2011 and August 2012. The results this year are virtually identical to last year's. But, there has been some improvement since 2011, when 29% of working Americans were saving less for retirement than they were in 2010.

Employed Americans between the ages of 50 and 64 are the most likely of all age brackets to be saving less this year than last.

"This is troubling considering the availability of catch-up contributions for those 50 and up, as well as the higher 2013 contribution limits for all eligible IRA and 401(k) contributors," said Greg McBride, CFA, Bankrate.com's senior financial analyst.

Trouble at the higher levels

Upper-middle-income households are another trouble spot, according to the report with 21% saving less for retirement than they were last year and only 14% saving more.

Overall, the Bankrate.com Financial Security Index is down for a second straight month, but at 100.5, it is clinging to a level above 100 that indicates financial security has improved from a year ago. The Index has been above 100 for six consecutive months.

Across the board declines

Readings slipped on all five components in August (job security, net worth, debt, savings and overall financial situation). Still, four of the five are still showing improvement over the past year. Savings remains the weak link, with those saying they're less comfortable outnumbering those that are more comfortable by a margin of nearly two-to-one. Consumers have voiced negative sentiment on savings in every month since polling began in Dec. 2010.

Following the disappointing unemployment report for July, job security among the highest-income households (annual income greater than $75,000) turned negative compared with a year ago.

The survey was conducted by Princeton Survey Research Associates International (PSRAI).

Retirement shouldn't be all that complicated. You work for 40 years or so and then live off your benefits and savings. At least that's the ideal.

The Great Recession derailed much of that conventional thinking and the brave new world of the corporate workplace has added new elements of uncertainty, not to mention loss of income in some cases.

This week a couple of pundits even raised questions about that most sacred of retirement tools, the 401(k) savings plan. Contributions to that account are tax-deferred, meaning you don't pay taxes on that income until you start withdrawing the money. In the meantime, it grows each year tax-free.

'They stink!'

But stock guru Jim Cramer says “most 401 (k) plans stink.” On CNBC, Cramer took aim at what he called most plans' high fees and limited investment choices.

Also this week, Marketwatch's Cliff Goldstein penned an article entitled “5 reasons not to contribute to your 401(k).” Goldstein worries about employers who don't match contributions and employees who pile money into their retirement accounts when they have mounting debt and other needs. 

While 401(k) plans continue to work well for many savers, there does appear to be new thinking about retirement in general and preparing for it.

"We know we will at some point want – or need – to stop working, but we so rarely think about a systematic approach to doing so, and that is often the undoing of many of us once we enter our golden years," said Wayne von Borstel, author and financial planner. "But if we follow four fairly basic rules, we can prepare for a retirement that is comfortable and secure."

Collect some cash

Von Borstel says the first rule is to create a cash reserve safety net beyond your retirement savings. Many people are under the assumption that's what their retirement account is. It isn't. Should you have to tap it before age 58 and a half, you would incur a hefty 10% penalty. You would also have to pay income tax on the withdrawal as though it were ordinary income.

A savings stash gives you after-tax money that you can use to pay an emergency expense, including the loss of income. Von Borstel suggests a healthy balance between your cash stash and your retirement savings, with six months of living expenses in savings.

The second rule is to be conservative with a portion of your portfolio. While bonds may seem boring, Von Borstel says you may need something in your retirement account that can provide steady income.

"One of the worst things we can do in retirement is liquidate retirement accounts in a down market,” he said.

Be realistic

Number three is to set a realistic goal. Back before the Great Recession financial planners urged their clients to aim high. But you are more likely to meet your goal if it is set at a realistic number.

The fourth rule is to eliminate all debt by the time you retire. That includes home mortgages.

"If we own our home and don't owe anyone a red cent, we can hunker down and live on almost nothing,” von Borstel said. “In that way, the probability of surviving any financial disaster is [improved]."

A big problem with the thinking about retirement is that it sometimes takes a cookie-cutter, one-size-fits-all approach. It shouldn't.

Each retiree is different, with different needs and expectations. It doesn't hurt to review your retirement savings plan from time to time and make adjustments. In fact, it's a good way to make sure your future plans are in sync with present realities. Discussing your situation with a trusted, competent and objective financial advisor is a good start.

It's a question that has been asked for years but seems to gain more urgency as the second wave of the baby boom generation approaches retirement. Exactly how much money will you need?

There is no simple answer. In fact, the most common answer is “it depends,” which is of little or no use. Some retirement planners say you need 70% of the annual income you earned during your working years.

This is a pretty tall order, unless you have a generous pension and a fat investment portfolio. Without either, you are pretty much dependent on Social Security, which is not something you want to be. After all, the average Social Security payment for a retired worker at the start of 2012 was $14,760 a year.

Where you live is important

So if you are not anywhere near the 70% level of previous income, you may need to take steps in retirement to reduce your expenses. Where you live can have a big influence.

"People who live in a given area are competing with each other for the same goods and services, including housing, cars and groceries," said Mike Sante, managing editor of Interest.com. "This is why we thought it would be useful to compare younger and older adults' incomes in each state. We found that many senior citizens are significantly underfunded and risk running out of money, especially since people are living longer than they used to and may need to support a two or three decade retirement."

Besides Social Security, retirees can generate income from their savings – but not by keeping their money in a bank account earning less than 1% interest. The Federal Reserve's monetary policy of near 0% interest rates to stimulate the economy has hit cautious savers particularly hard.

Meaning, if you want to generate serious income from your money it needs to be invested in something with a higher return. For most people that's the stock market.

Wall Street

Money invested in stocks can generate returns in two ways. It can generate quarterly dividends, which are like interest payments. The value of the securities can also go up, allowing you to sell shares periodically to generate cash.

But the stock market carries risks bank deposits do not. The value of the securities can also go down, meaning you would lose money if you were forced to sell the stocks in order to raise cash during a down period in the market.

Companies that pay a nice dividend one year might reduce it the next if business takes a turn for the worse. That means you can't put your money in a set of stocks and forget about it.

Despite these risks, some experts say you can't avoid Wall Street. According to Kiplinger personal finance, one of the biggest mistakes retirees – and those planning for retirement – make is shying away from stocks.

After the recession and the stock market crash, many consumers fled the market. Those who did, however, missed a huge bull market rally that began in March 2009. According to Kiplinger, you can get back in by investing in stocks or stock mutual funds in set amounts on a regular basis. With this strategy, you automatically buy more shares at lower prices and fewer shares at higher prices. Avoid investing large blocks of cash at one time.

Keep working

Another way to maintain a necessary income level in retirement is to have a job, even a part-time job. But instead of the job you held for most of your career – and perhaps hated toward the end – find a job that lets you do something you enjoy, and provides the flexibility you want and need at this stage of your life.

Meanwhile, if you aren't pulling in 75% of your former income in retirement, don't feel bad because you have plenty of company. Nationally, the average income for those who are 65 and older equals just 57% of the average income for 45 to 64 year-olds.

And according to Interest.com, the fact that seniors overly rely on Social Security – not pensions or retirement savings – goes a long way toward explaining why so many seniors have so little money.  

Every day, more members of the baby boom generation retire. Only they're doing it a lot differently than their parents' generation.

They tend to be more affluent, healthier and still seeking life's spark. Sandra Block, an editor at Kiplinger, talked to a lot of recent retirees, seeking insight into how the latest gray-haired generation is changing the concept of retirement.

"When I talk to people and they say they want to retire, what they really mean is they want to quit the job they have right now,” Block said. “But they don't envision themselves never working again."

Far from it. They feel they have a lot of life left and they want to try something new. Sure, the income from employment is nice but this generation has always been all about the experience.

Unfortunately, people over 60 often find it's hard to get a job. A recent survey by AARP concluded that age discrimination remains a fact of life.

“Just because you want to work doesn't mean you'll get the chance,” Block said. One way baby boomers are getting around this is starting their own businesses.

Franchises

Boomers are among the largest group investing in franchises. A franchise often gives a new business owner a better chance at success because of business planning and marketing support. But some simply start a business from scratch, pursuing a venture that reflects their passion.

Another big difference between boomers and past retirees is purely social. In previous generations couples retired together. It's a lot less common now.

"Divorce is much more accepted now,” Block said. “Sometimes people retire and start spending a lot more time together and realize they aren't that crazy about each other. About a third of adults age 50 to 64 are single. Divorce rates for couples over 50 have doubled over the last 20 years."

As a result, boomers are likely to be into the dating scene, an idea that their children may find creepy. They are increasingly using social media and dating sites to look for romance. And because they're dating, boomers want to look good and be healthy.

Staying fit

"There's a tremendous financial incentive to remain fit because health care costs are going to be such a huge part of their retirement spending," Block said. “If they can work out, walk and get regular exercise they can make a significant dent in the cost of health care, even with Medicare."

Fidelity estimates the average couple spends more than $220,000 on medical expenses in retirement, mostly for chronic illnesses.

While some boomers are struggling to make ends meet in retirement, others have done quite well – but find some of their wealth must be spread around in the family.

"They're helping family members on both sides of their generation, their parents and their children,” Block said.

In many cases a boomer helps an aging parent with medical expenses. Children struggling with underemployment and student loans look to Mom and Dad for a helping hand.

Multi-generational households

"Their has been a huge jump in multi-generational households where several generations are living in one house,” Block said. “At the same time, more than half of people over 55 with children are providing them with financial support."

Retiring boomers are changing the housing industry. Builders are providing more homes with “in-law suites” and single level houses  better suited to aging residents.

The boomers were the generation that wanted to change the world, and while they are a little more realistic about that goal now, they haven't abandoned it completely. As a result, many volunteer their time and skills. The percentage of Peace Corps volunteers over 50 is at an all-time high.

They're even going back to school in increasing numbers. Colleges have increased the number and variety of programs that don't necessarily lead to a degree.

An estimated 8,000 boomers turn 65 every day, swelling the ranks of the retired, or soon to be retired. They aren't looking for a rocking chair or spending all their time on the golf course. They generation that exerted influence on culture, finance and the workplace for the last 50 years has no plans to stop.

When folks get near retirement age, some consider whether they should move to another state or stay where they are.

Those who decide to relocate may want to know how to go about it.

"Certainly the main things to consider as far as I'm concerned is weather," said Arthur Gladstone in an interview with ConsumerAffairs. Gladstone is the president of the Lakes of Environ Condominium Association, an adult community in Southern Florida.

"Number two would be an ambiance that would suit them in terms of the people they're moving in with and the area that they're going to live in and whether or not they can afford it. There are a number of factors I think that would have to be taken into account," he said.

Numerous considerations

But it's not just weather and ambiance that folks will have to consider when they're thinking about retiring in another state. 

Access to medical care, learning what the local crime rates are, how much the overall cost of living is and what the state and local taxes will look like should be researched too.

 According to research conducted by the Tax Foundation, a nonprofit based in Washington D.C., and CCH, a company that provides tax assistance and builds tax related software, the 10 states that impose the lowest taxes on retirees are: Alaska, Nevada, Wyoming, Mississippi, Georgia, Alabama, South Carolina, Louisiana, Delaware and Pennsylvania.

Simply put, some states just aren't good for people to retire in so they should look elsewhere, said Andrew Tignanelli, president of The Financial Consulate, based in Hunt Valley, Md.

"We often talk to our clients and in seminars about getting out of Maryland which is a high cost-of-living and a high-tax state for retirees," said Tignanelli in an interview with the Wall Street Journal.

In addition to researching local and state taxes, people should visit a new state at least once a month before deciding to move there after retirement. Renting before buying is another great way to learn an area, experts say.

And requesting information from the Chamber of Commerce about property and sales tax differences is another smart move.

Based on advice from the Professional Educators Benefits Company, a which provides financial services for people in the educational community, moving to another state should be a very slow process, not a fast one.

Easy does it

The company says you should avoid moving after a dramatic change in your life, because too much change at once could be overwhelming. So if you've just lost your spouse or just sold your home for example, you may want to put off moving for a while. 

As far as your medical and dental needs, it's essential to verify that your health insurance policy or your Medigap plan will be accepted where you're moving.

And what are some of the best ways to meet new people once you do move to a new state after retirement?

It's always best to seek out communities that offer a lot of activities and social clubs, as experts say it's the best way to meet a lot of people in one fell swoop.

Being active in your local community is another good move, especially for those people who are used to being busy. Not only will attending community meetings allow you to make new friends, it will allow you to stay involved in any future changes in the community.  

Don't forget family

In addition, many retirees like to go visit their families on occasion, so it's good to keep in mind how easy it will be to get where your loved ones are.

"Another thing that's very important, that I'm becoming more and more aware of as the years go by, is that a lot of people wind up going back to where their family is, even if it's not a retirement area," said Gladstone. "Either on a regular basis like for the summertime or to visit. Or when they get to the point when they can no longer be alone, like when they lose their spouse for example.

"The kids come and collect them and take them back north so that their with the bulk of their family and finish out their years that way. So that's something else to be considered," he said.

In other words, nothing lasts forever so plan accordingly.

Most people have some sort of goal in mind when they think about retirement. Financial planners have always thought of it as a number – an amount of money someone needs to live after they stop working.

It turns out consumers don't really think of it that way. Bank of America Merrill Lynch was astounded by a survey it commissioned of people getting ready to retire and those who had already retired.

The No. 1 goal for retirement was not building wealth but achieving peace of mind. And for many who are approaching their retirement years, that translates into remaining in the labor force.

“The idea of working a few extra years, cycling between work and leisure, has gone from being an outlier to being a core assumption in terms of how pre-retirees expect to spend their later lives,” said Andy Sieg, Merrill's head of Global Wealth and Retirement Solutions, in a conference call with reporters.

Charting a new course

Baby boomers, of course, are the ones charting this new course in retirement planning. The survey shows that not only do they expect to keep working, they also plan to do something different.

“When we drill down a little bit with pre-retirees we see that 51% are actually looking to reinvent themselves and try a whole new career in retirement,” Sieg said. “To them, retirement represents freedom and a flexibility to re-envision their lives and the boomers intend to grab that with both hands.”

As you might expect from boomers, retirees and those preparing to retire aren't defining their happiness in terms of money but instead value new experiences, peace of mind, making a difference and helping family members.

“Americans are trying to create their own safety net,” said David Tyrie, Merrill's head of personal wealth and retirement. “What they are seeking is guaranteed income, guaranteed principal value, protection against the curve ball of long-term care and a drive toward security.”

Reducing living expenses

For many retirees, part of that security and peace of mind could come from downsizing and reducing living expenses. If you aren't commuting to a job every day, it probably doesn't matter where you live. After all, some places are cheaper to live than others.

Bankrate.com has compiled a list of what it considers the top 10 states for retirement, based on the cost of living. The list includes, surprisingly, North Dakota. While many retirees seek the sun of Florida or Arizona, Bankrate says the frigid state of North Dakota offers good health care, low crime and a mild tax rate.

Other states of the list include places not normally thought of as retirement Meccas; Nebraska, Alabama, West Virginia, Virginia, Mississippi, Kentucky, South Dakota, Louisiana and – topping the list – Tennessee. The Volunteer State offers affordable housing and the second lowest overall cost of living in the nation.

Since a mortgage payment is most families' biggest expense, being able to purchase a home for cash can go a long way in the peace of mind department. Retirees in expensive housing states, like New Jersey, New York, Maryland and California can sell homes they've owned for a long time and use the equity to purchase a home in a less expensive state.

Benefits of no mortgage

The retired homeowner who pays cash for a house will still have to pay taxes and insurance on the property but will not have the principal and interest payment each month. It can make a big difference in a monthly budget and allow retirees to live on less income, or use more of their income to help family members – which the Merrill survey found to be a large motivating factor.

“We're heard talk of the sandwich generation, with an adult providing support for a parent and an adult child,” said Dr. Ken Dychtwald, CEO of Age Wave, which conducted the Merrill survey. “This looks more like a Rubik's Cube in a way.”

The survey found over half of those questioned expected to dip into their retirement savings to help out one or more family members. While it might place more pressure on the retiree, it might also be a source of their ultimate goal of achieving peace of mind if they are able to do it.

Social Security was established to provide supplemental support for people when they reached retirement age, now set at between age 66 and 70. But the law also allows recipients to begin drawing benefits early, at age 62.

While this might sound attractive, doing so significantly reduces the monthly benefit you are entitled to. Most financial planners suggest it is better to put off drawing benefits as long as possible. Unfortunately, it isn't always possible.

The Great Recession came along at the worst possible moment for America's baby boomers, who are entering their retirement and pre-retirement years. The stubbornly high unemployment of the last four years has meant many are out of jobs, or forced into part-time positions. Some see drawing Social Security at age 62 as a necessity. Before starting your benefits, here are some things to consider.

First, the total amount of your benefit, over your lifetime, doesn't change by starting your draw at age 62. The Social Security Administration simply reduces your monthly benefit to account for the four extra years that you will be getting monthly benefits. In most cases, starting your draw at age 62 instead of 66 will result in a reduction of 25% from what you would get at 66.

Example

For example, a 62 year old male might be due a benefit of $2,000 a month at age 66. However, if he began drawing benefits at 62, his payment would be only $1,500.

On the one hand, waiting four years will yield an extra $500 a month, or $6,000 a year. On the other, drawing at 62 would yield $18,000 a year for four years – a total of $72,000 – that he would not have received during that time.

At age 66, he would still be drawing the $1,500 instead of the $2,000 he would ordinarily have been entitled to. At a net loss of $500 a month, or $6,000 a year, it would take 12 years before the imbalance started running the other way. In other words, age 78 is his break-even point.

If he lives to be 90, he'll receive $72,000 less in benefits than he might otherwise have. If he lives to only 81, the imbalance is significantly less. So the first question you have to answer is how long do you expect to live, and will you need that extra 25% of your benefits in old age more than you will when you are in your 60s and 70s? For most people the answer is yes. But if you are scrambling for income now, the answer is less clear.

Additional penalty

But this might add some clarity. In addition to the penalty of reduced benefits, there is another significant downside to drawing Social Security benefits at age 62. You aren't allowed to earn very much additional income. For example, if you plan to start drawing at 62 but remain in a job paying more than $15,120 a year, your already-reduced benefits will be reduced some more.

If you are drawing Social Security benefits before your full retirement age of 66, your benefits will be reduced by $1 for every $2 over your annual limit – $15,120 for 2013. So if you are considering an early draw on Social Security because you can't find a job, keep in mind that any extra income must be limited to $15,120 a year, or you will see a reduction in benefits.

Once you reach full retirement age of 66, you can earn an unlimited amount of income without affecting your benefits, whether you began drawing at 62 or at some point later.

If you can wait until age 67 to 70 to start drawing Social Security, you get an added bonus. You would be eligible for delayed retirement credits, which increases your monthly benefit. If you have good genes and have a reasonable chance of living into your 90s, that could come in handy.

While it is a good idea to carefully consider all the consequences of drawing Social Security at 62, you should know that the decision is not irrevocable. You have up to a year to change your mind if you start drawing at 62. However, you would be required to repay the Social Security Administration everything you had received in benefits to that point.

Everyone's situation is unique so there is no one-size-fits-all kind of advice. The best course of action is to consult with a trusted financial advisor who can give advice based on your set of circumstances.

Living longer and retiring earlier doesn't appear to be a good combination. Surveys show more baby boomers have put off retirement because of the recent economic downturn.

But there could be another reason. With people now living well into their 90s, many people nearing the traditional retirement age realize they don't have the money to retire now, and didn't have even before times got rough.

While many people downsize in retirement and reduce expenses, the bills still come each month. Social Security goes only so far and, with the precarious nature of the government's unfunded liabilities, it might be wise not to put all your eggs in that financial basket.

Social Security dependency

But according to the Social Security Administration, Social Security benefits amount to 39% of the income a typical elderly person receives. Among elderly Social Security beneficiaries, 53% of married couples and 74% of unmarried persons receive 50% or more of their income from Social Security. Twenty-three percent of married couples and about 46% of unmarried people rely on Social Security for 90% or more of their income.

So the simple answer to the question, “how will you fund retirement,” may be to keep working. Stay on the job, keep putting money away in a retirement account and delay Social Security benefits as long as possible.

Boomers appear to be doing just that. A survey conducted by Country Financial found 38% of boomers said they would delay retirement by at least two years due to the downturn, the highest of any age group.

Don't want to be dependent

Only 31% believe the government should do more to fund Americans' retirement, compared to 34% of Americans overall.

"Boomers might be slamming the door on more government assistance because of the national debt or they're satisfied with Social Security as is," said Joe Buhrmann, manager of financial security support at Country Financial. "The boomers showed younger generations it's never too early to save. Start setting aside money in your 20s if possible and establish a long-term financial plan to stay on track and meet your goals."

Staying on the job longer presents a problem, however, if you become unemployed. And it seems to be a special problem if you lose your job as you are approaching your traditional retirement years.

Harder to find a job

A Bureau of Labor Statistics' (BLS) report showed that 5.8% of workers aged 55 and older were out of a job and actively looking last month. While this figure is lower than the national average of 7.7%, unemployed older workers are more likely to be out of work longer than their younger counterparts. In 2012, adults aged 55-64, on average, were unemployed for 54.6 weeks, compared to 36.4 weeks for workers aged 25-34, the report shows.

"Being age 55-64 and out of work is particularly difficult, because you're unable to tap into the traditional safety net programs like Medicare and Social Security," said Nora Dowd Eisenhower, senior vice president of economic security at the National Council on Aging (NCOA). "But jobs still matter for this population. With years of life still ahead of them, mature workers need opportunities now for training or retraining that leverage their experience and give them marketable job skills."

But older job seekers shouldn't assume that employers would prefer to hire a recent college graduate. AARP recently published a boomer re-employment guide with tips for older workers on how to market themselves.

What to do

If you are close to traditional retirement age and out of work, you might consider what demographic experts call a “bridge job.” It might not be in your field and it might not pay as much as you were making, but it can be rewarding and provide an income as you downsize and slide into retirement. Many people choose to work for a cause or goal they believe in, perhaps giving them a higher level of satisfaction than they received with their “career” job.

Depending on your income requirements, you can also consider starting a small, home-based business. Just steer clear of those packaged work-at-home “opportunities” that require an investment on your part. Try to choose something with no start up costs and that you will enjoy.

For example, if you are an animal lover you could start a pet sitting business. Walking a neighbor's dog while they are at work or out of town not only provides a small revenue stream but gives you some healthy exercise.

Check out some tips for starting a small business here.

Retirement was once a subject of fond anticipation. All too often these days it's a topic of dread. Who, after all, can afford to retire?

The whole concept has changed in recent years. At one time, a retiree hung it up around age 65 and began drawing Social Security and maybe a pension. If they had a low cost of living, they could do nicely. Weekly golf games, parties with friends and maybe a trip or two each year.

Somewhere along the way our idea of retirement became a bit more ambitious: a vacation home in Florida or maybe the purchase of a New England bed & breakfast or a California vineyard as a retirement business.

Some might have adequately saved and invested for such a life of leisure but most of us didn't. According to a survey by ING, the national average for retirement savings is 2.42 times your annual income. People in New Mexico saved the most, at 4.56 times their income.

Great Recession

Then along came the Great Recession of 2008. That seemed to change the landscape for a lot of people nearing retirement age.

“I believe this downturn hit baby boomers the worst,” said Michelle Perry Higgins, a principal at California Financial Advisors, in San Ramon, Calif. “Many people at or nearing retirement age were forced back to work or had their retirement dates pushed out. Some even began tapping into their retirement funds early to make ends meet. They simply never imagined that home value and stock market losses could be so severe. I also believe that many investors have had to reassess their risk level and determine what they could tolerate in this new economy.”

They've also had to recalibrate their savings goals. But how much savings is enough? A number of websites have devised retirement savings calculators, to help answer that question.

Last November the Center for Retirement Research at Boston College issued a report finding that over half of U.S. households may be unable to maintain their present standard of living in retirement. The hardest-hit were those nearing retirement and those with the highest incomes.

Rising medical costs

A 2012 study by Fidelity Investments found a 65-year-old couple retiring last year was estimated to need $240,000 just to cover medical expenses throughout retirement. That was a four percent increase from the previous year, when the estimate was $230,000.

“Today’s workers must understand that the cost of health care is expected to continue rising significantly in future years,” said Brad Kimler, executive vice president of Fidelity’s Benefits Consulting business. “Medical inflation is outpacing salary increases and cost-of-living adjustments for many people. Until that situation changes, it is critical that individuals include health care costs in their retirement savings strategies today so they can be prepared to pay their medical bills throughout retirement.”

Social Security won't get you very far but surprisingly, many retirees rely on Social Security benefits as their primary source of income. For a 65-year-old couple retiring in 2012 on a $75,000 annual household income, Fidelity estimates their annual Social Security payments will be about $29,970.

In another report, the Employee Benefit Research Institute found 60% of workers report total savings and investments, excluding home value and pension, are less than $25,000. It found 56% of workers have not even attempted to determine how much they need in retirement savings.

Sense of urgency

“The people I see that have a heightened sense of urgency about retirement are those that were actively planning for retirement pre-recession,” Higgins said. “They were caught off guard like everyone else, but they made corrections more quickly. During the financial crisis they were on top of their finances, adjusting living expenses, reviewing their portfolios and evaluating risk. These folks understand how the meltdown changed their financial plan, and are making moves necessary to keep themselves on track.”

Making matters worse for many people approaching retirement age is debt. It's a huge drain on resources at a time you need to be putting money away for the future. Credit card debt, car loans and even student loans are proving to be a financial drag for some baby boomers. If there's one message Higgins would like to deliver it's this: stop procrastinating.

“I believe there are many Americans that are not adequately prepared for retirement and the reality of this terrifies them,” she said. “I urge those people to take their heads out of the sand and start the planning process now. The recession didn’t discriminate against race or class; it affected everyone, so we all need to take some type of action. A retirement recovery plan will take a bit of effort, but it doesn’t have to be done alone. There are plenty of well qualified financial advisors that can help.”

Getting a handle on expenses

To get serious about retirement, Higgins says you need to get a handle on your expenses. If you've never tracked your expenses, start now – looking for places to cut. In addition, she says there are five questions you need to answer to get on the road to a secure retirement:

1. Would I be willing to downsize my home or move out of the area?
2. Am I willing to reduce my standard of living, if need be?
3. Can I continue to work for several more years if my financial plan requires it?
4. What is my model for retirement and is it a priority to me?
5. Have I been honest with my financial planner so they can help me achieve my goals?

A report by the Conference Board has gotten a lot of attention as it suggests an increasing number of Americans are putting off retirement. The report focuses mainly on economic reasons.

The business group noted a huge spike in the number of 45 to 60 year-olds saying they planned to delay retirement -- from 42 percent in 2010 to 62 percent in 2012.

"It's disconcerting that the two years in which the U.S. economy seemed to finally, if fitfully, turn the corner also left so many more workers compelled to change their retirement plans late in their careers," said Gad Levanon, Director of Macroeconomic Research at The Conference Board and a co-author of the report.

Putting off retirement

Those who've experienced a job loss, salary cut, or significant decline in home price are much more likely to have plans for delaying retirement. Overall, the report sees this as a negative development for those involved.

Just the title of the report, "Trapped on the Worker Treadmill," is dark and gloomy. It makes the assumption that most employees hate their jobs and find getting up every day and going to work to be a "daily grind."

For companies, it can be a mixed blessing. It can keep an experienced work force in place a while longer but also hamper efforts to cut costs. Staff reductions normally carried out through attrition will now require more buyouts. It can also be an obstacle to younger employees just entering the work force.

Good reasons to keep working

While the report focuses on the negative aspects of delayed retirement, there are also some pretty good reasons to stay on the job, assuming you don't hate it.

For one thing it gives you more time to build your nest egg. Assuming the children are independent and your mortgage payment is low, along with the rest of your expenses, your 60s are an opportune time to sock money away.

The longer you work, the fewer years you will be dependent on your retirement savings. By law you are not required to being withdrawing retirement funds until age 70 and a half. However, just because you are withdrawing the money from the tax deferred account, it doesn't mean you are required to spend it -- you just have to pay taxes on it.

Reduced benefits

The longer you can put off drawing Social Security, the larger your monthly payments will be. If you start your Social Security benefits at age 62, you will permanently reduce the amount of money you will receive by as much as 30% than if you had waited just four more years till the normal or full retirement age for most baby boomers.

If you don't think you can put it off to age 66, there is still an advantage to postponing it as long as possible. With each year between 62 and your full retirement age of 66 or 67, the reduction in your benefits is not as great.

If you are married and you expect your benefit to be higher than your spouse's, you should probably consider waiting. If you die first, you spouse has the option to receive your monthly amount if it's higher than his or her own. The benefit payments, however, will be less than they could have been for the rest of our spouse's life as a result of you opting to take early benefits.

Tax implications

Receiving early benefits also has important tax ramifications. If you plan to work in retirement and have a good income, there's a tax penalty on Social Security benefits between age 62 and 66. After age 66, you can earn as much as you want without affecting your benefits.

If you have group health coverage provided by an employer, you might think twice before giving that up. At age 65 you can begin Medicare coverage, but until then, you'll probably need some kind of coverage. Getting individual coverage is very expensive.

Another thing to consider is your social life. Many people don't realize it but work is a huge part of their life, especially if they have been with one employer for a long time. You may get tired of your co-workers from time to time, but decide if you are ready to end those daily relationships and how you will replace them.

Finally, think about what you expect from retirement. What, exactly, are you going to do with your time? A 2001 survey by SunAmerica found a majority of respondents said they planned to work in some capacity in retirement. For many, working at a job you enjoy isn't really work.

Retirement investment strategies are a hot topic all of a sudden. Not only has the investment landscape shifted over the last decade, a big portion of the population is headed toward retirement.

With thousands of baby boomers reaching their 60th to 65th birthdays every day, the search is on for investments that can produce enough income to support a comfortable retirement. It can be a problem, since the last decade has shaken a lot of confidence in Wall Street.

"Right now, $9.43 trillion is sitting in cash vehicles as people are moving away from the stock market," said Steve Jurich, President of IQ Wealth Management, in Scottsdale, Ariz. "The demand for that risk, for the potential upside in the stock market, has shifted sideways. The smart investor is asking where they can go to ensure a stable retirement income. That's now an area of demand."

Hybrid index annuities

Jurich is an advocate of the Hybrid Index Annuity, which has emerged as the hottest sector of the retirement investment scene since the Great Recession. Consumers nearing retirement often find it attractive because it is said to combine the best features of many different types of annuities.

Stan Haithcock, an annuity specialist in Ponte Vedra Beach, Fla., says the Hybrid Index Annuity is still little understood by most investors.

"Please understand that indexed annuities are complex products, and the majority of agents are unable, or unwilling, to properly explain them and usually just focus on a few sizzle points," he writes.

Annuities

First, let's focus on plain old annuities. An annuity is a stream of fixed payments you will receive, based on the amount of money you put in and how it is invested. The company managing the annuity takes what you pay in and invests it, creating returns that are used to fund the regular payments you receive.

Some retirees like the idea of an annuity because it's money they can count on each month. However, the return on the money is usually fairly modest, which results in lower payments.

Some annuities pay for a fixed period of time and then stop. Others, called "life annuities," pay as long as you live. These annuities are usually sold by insurance companies.

Upside potential

A hybrid Index annuity generally pays a standard rate of interest but also delivers the possibility of gains if the stock market goes up. It's this potential for upside gain that many find attractive. Jurich says it's a different breed that provides stability while preserving the option to make money when the market goes up.

"You don't have to worry about losing money, and there are still competitive rates of payout," he said.

But in a report on annuities, Walter Updegrave, senior editor at CNN Money, said the hybrids are hardly all gain and no pain. While they can shield you from market setbacks, he writes, their hefty fees and many restrictions dramatically dampen their growth potential.

Watch out for fees

In any retirement plan, fees are a major concern since they can cut into earnings. Since many retirement investments tend to be conservative in nature, there isn't a lot of growth there to start with.

Ideally, soon-to-be-retired consumers should be getting their financial advice from someone who is not trying to sell them an annuity, or any other type of investment for that matter. A retirement investment portfolio should be custom-tailored to the individual's needs and goals.

Over the last decade, with the stock market showing little long-term growth, some financial advisers and their clients have found income-producing securities to be an attractive way to build a retirement nest egg.

For example, investments in stocks or mutual funds that produce regular quarterly dividends provide a steady flow of cash. Over time, the value of the security might also rise, giving the investor two benefits -- income and growth. The stock price could also go down, but the dividends would continue in most cases.

Look for profitable companies

Not all stocks pay a dividend, but many do. Paying a dividend is one way a company returns a portion of its profits directly to its shareholders. So, before a company can pay a dividend, it needs to be profitable.

While banks are paying less than one percent on CDs, blue chip companies like Johnson & Johnson, Campbell Soup, General Mills, Chevron, and Kimberly Clark, pay dividends of three percent or more. Altria, Eli Lilly, Bristol-Myers Squibb, AT&T and Verizon, pay dividends of five percent or more.

A company may cut its dividend, so the income is not guaranteed. It requires the investor to follow the stocks in the investment portfolio closely. Still, the returns can be impressive.

If you invested $100,000 in a balanced, diversified portfolio of high-yield stocks that yielded on average six percent, your money would earn $6,000 a year in dividends, as long as the companies continued to pay those dividends. You would receive the dividends, usually paid quarterly, whether the price of the stock went up or down. If the stock value rose three percent per year, that's a combined nine percent annual return.

Master limited partnerships

For funds in a tax-deferred retirement account, you might ask your financial adviser about master limited partnerships (MLP) that have issued common stock. MLP dividends tend to be even higher because the companies are required by law to return more of their profits to shareholders.

It's not uncommon for an MLP to pay a dividend of eight or nine percent. While the tax reporting requirements can make them a nuisance for small investors, there are generally no tax reporting requirements if the shares are owned in a tax-deferred account.

Before making any investments, however, you should do research and consult with a qualified and objective financial adviser.

U.S. adults are more worried now about their retirement years than they were in 2009, when the economy seemed at rock bottom.

A Pew Research Center survey finds 38 percent of adults are “not too” or “not at all” confident they will have enough income or assets in retirement. That's up from 25 percent in early 2009.

In the last three and a half years the economy has begun to improve. The housing market has shown signs of life, the foreclosure wave is receding and job growth has been stable, although weak. On the other hand, household income has declined since the Great Recession officially ended in June 2009.

Young people now more worried

So why the growing pessimism about retirement? According to an examination of the two surveys, it's not the same people who were worried in 2009 that are worried now. According to Pew, it is now younger and middle-aged adults who are voicing the most retirement worries.

In 2009 it was “gloomy boomers” in their mid-50s who were the most worried that they would outlive their retirement nest eggs. Today, retirement worries peak among adults in their late 30s -- many of whom are the older sons and daughters of the baby boom generation.

According to a Pew Research analysis of Federal Reserve Board data, this is also the age group that has suffered the steepest losses in household wealth in recent years.

The new Pew Research survey finds that among adults between the ages of 36 and 40, 53 percent say they are either “not too” or “not at all” confident that their income and assets will last through retirement. In contrast, only about a third of those ages 60 to 64 express similar concerns, as do a somewhat smaller share of those 18 to 22 years old.

Unpleasant surprise

In 2009 baby boomers were caught off guard by the financial meltdown and the resulting drop in value of both their homes and retirement accounts. Being closer to retirement, they were alarmed at the dramatic turn of events.

As a result many boomers recalculated their retirement plans, deciding to remain on the job longer than previously planned. Those who didn't panic and sell their investments saw the stock market quickly rebound in mid 2009. For boomers, the outlook doesn't seem nearly as bleak.

Why are younger people now more worried about retirement? A review of Federal Reserve data suggests the reason.

The median net worth of this group, in their late 30s and early 40s, has fallen at a far greater rate than for any other age group both in the past 10 years and since the beginning of the Great Recession.

56 percent decline

Led by declines in home value, the median wealth of adults ages 35 to 44 was 56 percent lower in inflation-adjusted dollars in 2010 that it had been for their same-aged counterparts in 2001 -- the steepest decline for any age group during that decade and more than double the rate of loss among those ages 55 to 64.

Compounding the problem is that these tend to be expensive years, especially for couples that have delayed starting a family. Declining wealth and rising expenses makes it doubly difficult to put away money for retirement.

Yet personal finance experts say this is the best time to be saving and investing, since time is the greatest contributor to wealth-building. They say putting some money away each month into an IRA or 401 (k) account, is critical to building a nest egg over the next 20 to 30 years that can go a long way toward alleviating some of those retirement concerns.

Lots of baby boomers are nervous about retirement. The Great Recession took a heavy toll on many investments and former financial goals don't seem as attainable in some cases.

Eleanor Blayney, consumer advocate for the Certified Financial Planner (CFP) Board of Standards, says retirees and prospective retirees need a plan to spend their savings wisely while maintaining assets that grow and generate income.

"Today, many Americans are on their own when it comes to saving -- and then spending -- their retirement income," Blayney said. "The majority of Americans will have to learn how to generate income using assets and investments they themselves have set aside in their retirement plans."

That means retirees need to create a financial plan that continues to produce income throughout their retirement. It's what Blayney calls "creating your own paycheck."

There are other steps she recommends to help establish a retirement that will be financially secure.

Timing is everything

The point when you start taking income from your retirement account can make a huge difference. Withdrawals from a portfolio during a bad investment market may diminish the sustainability of those savings by several years. In cases of bear markets, those able to delay retirement, and continue earning income rather than consuming assets, are in a much better position to avoid running out of money during their lifetimes.

Conservative can be costly

Being overly safe, investing only in bonds or annuities, can end up hurting you in the long run. For most retirees, a healthy allocation to investments that will grow over time, rather than those that promise regular income, will pay off. Dividend stocks are good, but must be closely monitored and portfolios adjusted. Bonds are more predictable but not without risk. As a balance, investing in equities or other assets that are likely to increase in value can provide added security. According to Blayney, it's simplistic to think that investments that pay interest or dividends are safe, whereas growth stocks are not.

Finding the right withdrawal rate

Generally speaking, there is a consensus that a four percent annual withdrawal rate -- defined as the highest yearly payout from an investment portfolio that will not deplete the portfolio over a given period -- is a reasonable payout over the life expectancy of most retirees. However, retirees should adjust this rate in certain situations. When an investment portfolio is doing well, or when there are large expenses, perhaps for medical costs, a higher rate may be warranted or necessary.

Don't be afraid to spend capital from a retirement portfolio. Traditional IRAs, 401(k)s, 403(b)s, and self-employed plans are structured, under the tax laws, to be depleted over our lifetimes. Retirees are penalized if they fail to take principal from these accounts at a certain age. Many retirees find the prospect of spending down these accounts very upsetting, when, in fact, doing so under the guidance of a CFP professional can result in a far more comfortable and secure retirement.

Understand your tax obligations

Most retirement funds are tax deferred, so that you don't start paying taxes until you withdraw money. Tax rates help determine acceptable savings withdrawals, and utilizing both taxable and tax-deferred accounts appropriately can help control the amount of taxes owed in any given year. Withdrawing from these two types of accounts can be critical to sustaining a retirement portfolio.

Cut expenses

This may be one of the more overlooked aspects of a successful retirement. If you can downsize so that you don't require as much money each month, you don't need as much retirement income. The best place to save is probably with housing. If you are still making a mortgage payment, for example, consider taking your equity and moving to a smaller home -- preferably one you can purchase for cash. If you are considering the purchase of a condo, don't forget that most condos have pretty steep monthly homeowners association dues.

According to Blayney, spending matters more than investments. She notes the amount of fixed income in a portfolio could vary from approximately 35 to 65 percent without significantly changing sustainable withdrawal rates. This suggests retirees should focus primarily on expense management in retirement as the most effective way to ensure that their resources will last.

"Taxes, timing and spending are what matters most in creating income in retirement," says Blayney.