How To Be A Stress-Free Retiree

The key to retirement is replacing worry with a solid portfolio. Here's how to structure your investments to carry you through the golden years.

Part four of the lifetime investment guide looks at how investors in their 50s and 60s can shape their portfolios to prepare for a long, enjoyable retirement. Forget the old rules about shifting all your assets into income-producing investments like bonds: you’ll need at least some stocks to help you conquer inflation.

Bill Picott is 57 years old but he’s not intimidated by the big six-O. “In three or four years, I want to have the option to retire,” says Picott, who works as director of technical support for Digital Equipment Corp. in Littleton, Massachusetts. “I’m not saying that I will, but I want to be able to retire if I choose.” What’s behind Picott’s confidence? Let’s just say it’s a solid grasp of just what he’ll need for the years ahead–$1-$1.2 million by his estimate.

Wait a minute. Sounds like an astronomical sum? Intimidating or not, Picott is being realistic according to financial planning experts. “Not that long ago, there was a consensus that you wouldn’t need more than $300,000 or $400,000 in savings for a comfortable retirement,” says Percy Bolton, an asset allocation consultant in Los Angeles who has been recognized by Worth magazine as one of America’s best financial advisors. “Now, many people will need $1 million or even $2 million to maintain their lifestyle.”

Does that mean you’ll have to scrap retirement altogether if you haven’t squirreled away a cool million? Not necessarily. “Don’t be intimidated by those huge numbers,” says Dee Lee, a financial planner in Harvard, Massachusetts, who says retirement boils down to balancing expenses and savings. “You can retire with a smaller amount of savings, but that may mean scaling back your expenses, perhaps to half of what you spent while you were working,” she points out. On the other hand, she says, if you’re wedded to your current lifestyle, you have no choice but to amass a large retirement fund, a fact that is especially true if you’re planning to retire young and healthy enough to travel or spend time pursuing expensive hobbies.

If you’ve followed our Lifetime Investment Guide so far, you know that we’ve stressed the importance of steady, regular saving–at least 10% of your gross salary, but realistically more if you can do it. If you’ve laid a solid foundation rooted in a good savings plan, determining what you’ll need for retirement and how you can bridge any gap now becomes simply a matter of mathematics. And for the calculations you’ll need, we’ll refer you to our fourth worksheet. In short, it will help you figure out how much you spend each year while you’re working and estimate how that’s likely to change after you retire. “The standard is that people will need 70%-80% of their pre-retirement income in retirement,” says Bill Harris, a financial planner with Asset Dynamics in Toledo, Ohio. “Some people, though, want 100% of their working income-they’re just not willing to sacrifice their lifestyle.”

Next, project how much cash flow you can expect in retirement from these

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