#1: Calculate what you’ll need.

Most people expect to have the same standard of living in retirement that they have always enjoyed, yet most haven’t calculated how much their retirement will actually cost. Experts say that most retirees require at least 80 percent of their pre-retirement income to live comfortably.

To help ensure you have enough money for retirement, estimate what you think you’ll need for basic living costs and other expenses that may come into play, such as traveling, a new hobby, increased medical bills and, of course, inflation (see Tip #2).

While no one can predict the future, having a plan in place can better prepare you for retirement. A retirement calculator is a great way to get started.

#2: Don’t forget inflation.

Your money buys less and less every year due to inflation. As a result, you will need more money in the future to buy what one dollar buys today. The bottom line for your retirement is:

• You'll probably need a much larger nest egg than you think.
   
• Earnings on your money need to outpace inflation by a comfortable margin. That way, you are making real gains instead of just breaking even. 

#3: Manage and reduce your expenses now.

To help offset future costs, get your expenses under control before retiring. One of the best ways to do that is cutting down your credit-card debt. The average household’s outstanding credit-card debt was $10,679 at the end of 2008.¹ That’s a big expense to have to deal with when paychecks stop in retirement.

#4: Diversify, diversify, diversify.

As we’ve seen in the recent economic downturn, when you invest in securities, you incur "market risk.” This is the risk that the stock or bond market will decline, and securities within those markets will lose value. The best way to help cushion your portfolio against market risk is to diversify—to divide your money among different types of investments. Diversification is important because each investment responds differently to economic events and other market conditions. Diversification does not, however, assure a profit or prevent a loss.

Depending too heavily on government programs such as Social Security or Medicare is risky, too. It is estimated that Social Security will be out of money by 2037 and Medicare by 2017.² It’s best to have a variety of income sources to deal with the unexpected in your retirement years.

#5: Include your family in the planning process.

It’s important to talk to your family about your retirement goals. By building a roadmap together, no one is surprised should circumstances change. Make sure that both you and a loved one know the types, location and size of each account, as well as what beneficiaries are named. It is a good idea to include adult children in any plans. If an unexpected illness or death in the family occurs, they will be better prepared to help with any financial responsibilities.

Also keep in mind the added expense of caring for elderly parents. According to the Retirement Planning and Savings Survey, nearly 85 percent of Puget Sound-area respondents age 45 to 64 do not plan on or are not currently supplementing their parents’ retirement income. Yet nationally, 41 percent of baby boomers who have a living parent are helping take care of them either with financial help, personal care or both, and 37 percent think they will some day.³ Knowing what an aging parent’s expenditures are can help prepare your own retirement plan.

#6: Continually evaluate your needs.

Changes in family, health or job benefits can affect how much income you will need for retirement. Make the most of your plan by reviewing your investments regularly. Ensure they are still appropriate for your goals, timeline and risk tolerance. These life events also should trigger an insurance review to make sure your life insurance coverage is in line with your changing needs.

#7: Consider creating a guaranteed income stream.

Consider creating a stream of guaranteed income, such as an immediate annuity, if you don't have a pension. People are living longer, and the prospect of outliving your money is very real. Using a portion of your retirement portfolio for guaranteed income will help ensure your money lasts as long as you do.

#8: Consult with an independent financial advisor.

You don’t have to go it alone….A financial advisor can help you build, grow and access your retirement savings. In addition to having a pulse on market conditions, financial advisors will work with you to develop goals, assess risk tolerance and determine the right product mix for your unique situation. They also can help develop strategies that compensate for inflation, including cost-of-living increases in annuities, investments in tax-deferred vehicles that increase in value, and other financial products tailored to your specific needs.

#9: Become an informed consumer of healthcare.

Take time to understand your health insurance coverage. What is your share of costs? What network of providers is covered and at what level? What exceptions apply? When consulting a healthcare provider, question them about the cost of recommended treatments or medications and what the insurance coverage will be. When selecting an insurance plan—whether sponsored by your employer or purchased by you individually—talk to an objective benefits advisor to find the plan that best fits your needs and budget. Here are additional answers on some frequently asked questions about health insurance benefits:

• Common Medical Plans & Terms
• Explanation of Benefits (EOB)
• Your Insurance Plan and the Doctor’s Office

¹ Nilson Report, April 2009
² Status of the Social Security and Medicare Programs
³ USA TODAY/ABC News elderly care poll, June 2007