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Five areas of focus to help secure your retirement


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(ARA) – In helping Americans refocus on retirement planning, sometimes returning to the most fundamental truths is the best route.

“These truths tend to get lost when we are bombarded with information about retirement in the general media,” says Robert Fishbein, a vice president in Prudential’s Tax Department.

With that in mind, Fishbein shares the five “back to basics” tips:

1. Save more

Americans have not saved as much as they need to for retirement. To ensure you are not part of the savings problem, start by considering all of the retirement savings and other savings options available to you. Some savings vehicles, like your 401(k), IRAs and Roth IRAs, probably come to mind right away. Others may be less apparent, such as life insurance (while the primary purpose of life insurance should be for protection, the cash value of life insurance may be used to supplement retirement income) or an employer-sponsored savings program.

Once you inventory your savings options, make sure you are using them to the maximum extent possible. It is a good practice to “pay yourself first” and contribute savings directly from your paycheck so you are left with the balance for day-to-day expenses.

2. Spend less

Over the last few years we have started to see the emergence of a new, more cautious perspective on spending and debt. You can manage your spending by creating and following a budget. This way you can track your inflows and outflows and understand how much you really spend on coffee, dining out or vacations. By living within your means, you will always be in the position of strengthening your financial position.

Saving more and spending less seem like such obvious components of planning for a successful retirement, yet we tend to focus on other things because they are so hard. Many people spend their retirement planning energy on thinking about investment return, since it requires less personal sacrifice. Ultimately your chances at a successful retirement probably depend more on how much you save and how much you limit spending than on any other investment and tax tip.

3. Protect income

Life insurance, health insurance, disability insurance and long-term care insurance are all ways that we protect our income or assets.

* Life insurance can be used for estate planning purposes, but its fundamental value proposition is protecting your income earnings potential so dependent family members will not be destitute upon your premature death.

* Disability insurance works similarly to life insurance but in the context of an injury or sickness that precludes your working.

* Health insurance helps to minimize the risk that your current income will be consumed by unanticipated or extraordinary health care costs.

* Long-term care insurance helps to minimize the risk that your assets will be depleted by a chronic illness or disability.

All of these insurance products not only enable you to live or support others but to preserve your retirement assets.

4. Diversify

“Diversify” is used here in a broad sense that includes investment, financial advisor, financial institution and tax diversification. In its most simple form, this area of focus is really the lesson we learn at an early age not to put all of our eggs in one basket.

Investment diversification means deploying a strategy that mixes investments among bonds and different types of equities, such as growth or income focused stocks or mutual funds, as well as across domestic and international markets.

Investment manager diversification is about the risk of being exposed to one individual. Similarly, because you are relying on the full faith and credit of a financial institution, you will want to ensure the company is on solid financial footing.

You should also diversify your assets with consideration for their different tax implications. Some assets are tax-deferred, like a traditional IRA. Some are tax-free, like a tax-exempt bond or a Roth IRA. Some require distributions that start at a certain age, like a traditional pension plan or traditional IRA. And some require no mandatory distributions during the owner’s lifetime, like a Roth IRA. The tax attributes of your retirement assets are critical to understand since they will ultimately determine how much after-tax income you’ll retain.

5: Guarantee income

Guaranteeing income is a way you can lock in an income stream to minimize and manage investment risk and longevity risk. The first step in terms of guaranteeing your income is determining how much income you will need in retirement.

After you identify your income goals, consider what assets you have that provide guaranteed income. Start with Social Security and any traditional pension plan, and consider how you could adjust the start time of those lifetime payouts to enhance how much guaranteed income you can receive. Then, based on this analysis, you can decide how you might need to supplement your existing guaranteed income position — for example, with an annuity that provides additional guaranteed lifetime income or delaying your Social Security payments to the full retirement age. For many the unfortunate reality may also include working longer than originally planned.

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Five areas of focus to help secure your retirement