5 ways to make retirement savings last

But don't spend up tax-advantaged, high-earning savings in order to delay taking Social Security, warns Thomas Dalton, a CPA and a professor of accounting and taxation at the University of San Diego, Calif. Dalton calculates for an article in the CPA Journal that if you're making 8 percent on $500,000 in a tax-advantaged retirement account, you'll come out ahead by delaying taking Social Security to age 70 only if you live to be 106. However, delaying Social Security is progressively more appealing as the interest rate or savings amount declines. At 2 percent interest, you come out ahead beginning at about age 82.

3. Ladder your bonds 

The old-fashioned answer to retirement security was bonds -- especially government bonds, which pay 2 or 3 percent interest. That's the going rate right now for inflation-protected bonds. But you don't lose principal, and unless the world as we know it comes to an end, you'll be able to cash them out when you need them for your old age.

Reinhart, whose company manages lots of individual and corporate pension assets, says that to duplicate the $45,000 annual pension common among today's mid-level corporate retirees, an employee with a 401(k) plan would have to sock away $1.5 million. To have the extras that current retirees enjoy, they'll have to save more.

Current savers who have hit this level of nest egg often feel rich, Reinhart says, even though they aren't. They are often tempted to put their money in low-earning bonds for the sake of safety. It's a bad idea, he believes. To stay ahead of inflation, he advises putting at least 80 percent of your savings into stocks and stock mutual funds. But if it will make you feel better, put 20 percent of your nest egg in laddered bonds and consider that a safety net for your old age.

Here's how it works: Buy equal numbers of Treasury bonds due to mature in one year, three years, five years, seven years and nine years, so your portfolio has an average maturity of five to six years. This gives you the flexibility to trade when rates rise or fall.

You can buy most of a ladder through Treasury Direct without cost or commission, but because the government is no longer selling bonds with maturities between five and 10 years, you'll have to get those from the secondary market where you'll encounter big upfront costs.


A better alternative might be to take a look at bond mutual funds with an expense ratio that is less than 0.35 percent and no upfront or back-end fees.

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