retirement
Congratulations! You're retired. Now what?

Long-term capital gains are taxed at rates as low as zero percent to as much as 15 percent until 2010 as compared to ordinary income tax rates, which can be as high as 35 percent for high earners.

 Retirement-income mutual funds
Some mutual fund companies, such as Fidelity, Vanguard and Charles Schwab, have begun offering funds designed with retirees in mind. The funds come with low fees and provide a steady stream of income. Also, you're not locked into a long-term commitment with the money; you can access it at any time.

Funds from Vanguard and Schwab provide income as well as capital preservation or appreciation. Fidelity Investment's Income Replacement funds are more like target-date funds that dole out earnings, as well as capital over a prescribed period of time with an expected expiration date.

The Vanguard funds are structured similarly to university endowments, says John Ameriks, head of Vanguard's investment counseling and research group and retirement expert. "The notion being that there would be a proportional amount of the investment spent each year, and periodically that amount would be adjusted to reflect changes in that fund. But over time you would want to have a regular payment stream and also sustain or grow the investment capital," he says.

Schwab's Retirement Income funds work similarly, with different funds available based on the amount of income needed or growth desired.

"We like to think of it as helping investors recreate their paychecks that they had at work once they are no longer working," says Patrick Waters, director of retirement income products at Charles Schwab.

Other financial firms have joined the fray, including Russell Investments, DWS Scudder and TIAA-CREF. Expect more to do so. The big drawback of these funds: They offer no guarantees.

 Withdrawal strategies
According to a recent study by Russell Investments, almost two-thirds of investment returns are earned during retirement -- not before. In other words, your pie of retirement investments is not done cooking when you stop working -- in fact, far from it.

"The old rule of thumb of investing your age in bonds is a rule of 'dumb.' If you go conservative early in retirement, inflation eats away at bonds, so at the middle and end of your life span you have diminished capabilities to purchase things right when they get more expensive," says Birkofer.

As such, a healthy exposure to equities is necessary -- but just make sure it's not too much exposure.

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It has to keep up with inflation, but you can't take excessive risks with it, says Garrett.

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