By: Vinita Singla, Special to CNBC.com
Reprinted from http://www.cnbc.com/id/44257039

If saving for retirement was a struggle before the financial crisis of 2008, imagine how lost jobs, flat wages, underwater mortgages, higher energy and food costs, and local and state tax hikes have combined to make the goal even harder.

Insufficient retirement money is the number one financial worry among 66 percent of Americans, according to a Gallup poll. Yet many of them have long-term retirement savings plans.

Americans who don’t save for retirement often outlive their assets. Of those folks, 68 percent have less than $1,000 in savings, according to the Employee Benefits Research Institute, EBRI. “More and more in today’s environment, people really have to take responsibility for their own retirement security,” says Jean Setzfand, AARP’s vice president for financial security.

So, think of saving for retirement as a second job.

Here are some strategies to help you plan for a financially secure retirement. You may not be able to achieve all of them, but the more the better.

1. Be debt-free before retirement

Debt during retirement increases one’s expenses while eroding one’s nest egg.

To avoid unnecessary financial burdens, “take stock of your situation and create a plan to reduce debt as you approach retirement. In some cases, paying down debt might mean delaying full retirement,” says Setzfand.

Many experts still recommend owning one’s home before or at retirement.

“During the 2008 financial crisis, clients with a free and clear home tended to sleep better than those who still had a mortgage,” says Brian Fricke, a certified financial planner (CFP) and author of “Worry Free Retirement.”

If you retire holding a mortgage, ensure that you can afford the utilities, maintenance, and insurance payments that also come with owning property, says Setzfand.

Also, consider downsizing to a smaller home; paying down mortgage principal and refinancing the remaining portion to reduce your monthly mortgage payments; and weighing the tax benefits against a complete pay down.

2. Design savings and spending plans

This one is a must for everyone.

“Retirement planning is particularly hard because the implications of your choices tend to get magnified,” says Jason Branning, CFP, and owner of Branning Wealth Management.

You’ll need to determine the amount of savings needed for your desired retiree lifestyle. Completing the calculation can boost one’s confidence; over 25 percent of Americans who have completed a calculation say that they are very confident that they will save enough money for retirement, reports the EBRI.

A spending strategy is equally important. Rather than follow a budget, many people spend what comes in. Fricke encourages totaling the last 12 months’ checks that you wrote to calculate a realistic withdrawal rate. Many professionals recommend a 4 percent spending rate of your savings, which should last for 25 years.

3. Think twice before leaving the workforce

“The mystique of retirement can look good from a distance, but later lead to regret something akin to ‘buyers’ remorse,’” says Dr. John Osborne, a professor emeritus at the University of Alberta.

So, try reducing work hours before quitting your job. It may enable you to return full-time, if needed.

Another consideration is retiree benefits. If you don’t have them, many experts recommend delaying retirement until you qualify for Medicare [cnbc explains] . As you near 65 years of age, you should be able to negotiate a flexible work schedule.

“Fifteen years ago, if people retired without a retiree medical benefit, nobody gave it a second thought; they just went out and bought an individual health plan,” says Fricke.

4. Be wary of cash buyouts

Know the implications of taking a buyout.

“Those who take buyouts can have later regrets about accepting money to retire, especially when they come to see themselves as a commodity,” says Dr. Osborne, who authored “Retirement Psychology.”

Osborne adds, “there can be feelings of being disposed of because one has reached a ‘best before date,’ or has been bought out.”

Employers often hire specialists to persuade senior staff members to take a cash buyout, which enables them to replace high-salaried seniors with less-expensive junior employees.

If tempted with a buyout, first ask yourself: What you would do after accepting the buyout?

“Are there still opportunities for you to earn an income either through a part-time job, a shift in career, or turning a passion/hobby into a money making venture?” says AARP’s Setzfand.

5. Optimize tax strategies

Use appreciated stock or mutual funds to make charitable contributions of $1,000 or more.

Say you have $10,000 in cash to donate to a charity, but you also have a stock worth $10,000, which you bought for $2,000, and you don’t want to sell it.

“Give it to charity,” says CFP Fricke.

The tax-exempt charity won’t pay tax on your stock profit, and your donation will be tax-deductible.

“You don’t have to wait 30 days, because you’re not selling at a loss. You still own the same amount of stock, but now you have a higher tax basis so if you do sell in the future, your capital gains tax bill won’t be quite as big,” says Fricke.

There are lesser tactics, as well. Only buy municipal bonds if you’re in a 35 percent and over tax bracket (rare for most Americans), and choose exchange-traded funds, ETFs, [cnbc explains] , over mutual funds because you only pay taxes on profits when you sell your shares, thus avoiding annual cash distribuitions, which also complicate tax filing.

6. Use tax-efficient income streams

Retirees should “document, prioritize and categorize,” says CFP Branning. The idea is to “use the assets that we own to generate income in a tax efficient way.”

Determine your annual base or mandatory expenses—food, clothing, shelter, utilities, medical, and transportation—and discretionary expenses.

To avoid unnecessary taxes, retirees should only generate income that is needed to cover base expenses, says Branning.

“Most essential for retirees is generating actual net retirement income dollars, because not every dollar of income is equal from a tax perspective, ” he explains. “Every dollar taken from tax-free accounts is actually worth a dollar in net terms, whereas a dollar taken from a taxable account may only be worth 80 cents,” given the tax rate.

7. Don’t be an ATM to your kids or grandkids

That’s what CFP Fricke says.

Be smart about how you give away money.

Fricke advises grandparents to set up an investment fund with a goal that interests the child. “A grandparent 401(k)” he says. “To most teenagers, college isn’t that sexy and fun to be working towards. But for teenage boys, their first car, by golly, that’s something they’ll work for.”

For every dollar the grandchild adds to an investment or savings account, the grandparent can supplement.

8. Wait to tap into Social Security

“Nearly a quarter of older Americans rely on Social Security [cnbc explains] for 90 percent or more of their family income,” reports AARP.

To guarantee sufficient monthly payments during retirement, one should know the best time to tap into Social Security benefits.

“The Social Security claiming decision is one of the most important, yet complicated, retirement-related financial decisions,” says AARP’s Setzfand.

Many experts agree that waiting pays off. If claimed too early, the benefits could decrease up to 8 percent a year. If you wait until the age of 70, the benefits increase—and by quite a lot.

Find the right time for you: AARP created the Social Security Benefits Calculator to help people weigh the variables and compare estimated monthly benefits to make an informed decision.

9. Prepare for the unexpected

Update important documents every five years.

“Any time there’s a birth, death, divorce, marriage. Especially as people are living longer and longer, and with health-care advances being at what they are, it’s important to have a health-care surrogate or a health-care power of attorney,” says Fricke.

A health-care power of attorney is a legal document that appoints somebody to make medical decisions on your behalf if you can’t.

Retirees also should consider investing in long-term care insurance, which typically covers the cost of home care, nursing-home care, and assisted living, usually not covered by traditional health insurance. “They’re not covered much by Medicare and they’re only covered by Medicaid after you have spent all of your money,” says Richard Johnson, director of the Program on Retirement Policy at the Urban Institute.

When planning for retirement, don’t overlook care-giving. Family members may ask you for help. “A retired couple may wind up with family members living with them, being called to baby sit, taking care of a spouse,” says Dr. Osborne. Plan accordingly, as taking care of someone can cost money.

10. Enjoy spending within your means

Many retirees don’t live as comfortably as they could, fearing they’ll run out of money.

“When you’re 65, you don’t know how long you’re to live. ‘What if I live to 110?’ There’s a lot of uncertainty involved,” says Johnson.

Johnson says the solution is to buy an annuity. An annuity is a pot of your money that an insurance company converts into regular payments until one’s death.

The uncertainty diminishes. “No matter how long you live, you will receive a regular payment each year,” says Johnson.

But others say annuities involve risks.

“You lose long-term capital gain tax treatment on profits. You can’t offset gains with losses, and your heirs lose the stepped up tax basis if/when they inherit the account. Not to mention the high fees and big withdrawal penalties,” says CFP Fricke.

Our father/son surf trip to Costa Rica was a truly great experience…and not just for the surfing. Before our trip I was wondering what kind of impact the trip might have on Justin or Adam.

And then…all on his own…Justin decides to start writing a weekly note, here’s the 1st one;

by Justin Fricke

Hola familia y amigos,

I’m sitting here now just reflecting on what this trip has brought me and the rest of the Winter Springs Surf Team LLC. (What we named our Father/Son surf group)

So many life lessons come to mind.

1.)   Be thankful for what you have-This being my second time in Costa Rica I somewhat knew what to expect in regards to the economy and the way the locals live. This place is literally a third world country, but you would never know if you closed your eyes and just talked to the people here.

For the most part they are almost always happy and want to share their life stories and want to hear your life stories. For example the afternoon hotel guard or ‘watchie” Tumbo” always has a smile on his face and greets us with an “Hola amigos, como esta’s”. Followed by asking us where we went for the day.

The other day I was coming back from the taco stand and he pointed at my arm and said “Hey Pura Vida”, I smiled and said “si”, he then asked why I got (a tattoo) it and I explained to him that my family and I were here 3 years ago and heard everyone saying it and my mom and I fell in love with the saying and decided to get Pura Vida tattoos. Just being that person to always have the smile and want to be the first to say “Hello” can always make a difference in someone’s life.

2.)   Get a good education-We’re presented with so many opportunities in America and so often we just let them slip by and not even notice.

3.)   “Get Comfortable Being Uncomfortable”- This saying has been said to me by two very wise people in my life, Mauricio Garcia and Randy Pawlowski. (Two of Justin’s Mentors) I can finally say I know what it’s like to “get comfortable being uncomfortable”.

When my family went on vacation I would always worry about what could happen in the worst way. This trip has been so changing and my paradigm has certainly been shifted. Back home I would normally never ask for help, because I would always wonder in my head “I don’t want them to think I’m idiot” or something along those lines. Since I’ve been here I can’t even keep track about how many questions I’ve asked and for the most part I’ve asked the questions and had small conversations in Spanish/Spanglish. Once you finally decide to let go and open up and step outside your comfort zone who knows what you could get/accomplish in life.

Going back to point number one I want to thank my dad, brother, Mr. Nickerson, and Pat for making this one amazing trip. This has by far been one of my most favorite trips.

Pura Vida,

Justin Fricke

PS-If you want to see pictures from our trip go to http://www.facebook.com/pages/Winter-Springs-Surf-Team-LLC/150359798313163?ref=sgm

As a retirement expert, that’s a question I get asked quite often. People want to know if it makes sense to pay their mortgages down at a faster rate.

If you’re going to get rid of your mortgage within a 5 – 7 year time frame; I say it makes sense to make the extra mortgage payments to get rid of your mortgage.

However, if it’s going to take you longer than five to seven years to get rid of your mortgage, I would advocate NOT making extra principal payments because you’re building what I call dead equity.

Your required mortgage payment is still the same. It doesn’t go down. So when you make extra payments, you’re actually reducing your tax deductions — but you still have to make the same minimum mortgage payment so you haven’t affected your current cash flow in a positive manner.

I’d rather see you just save and accumulate that extra money in an outside fund. And if you look at the payment differential, and take that differential and apply it to, say, an S&P 500 index fund, then the odds are in your favor significantly that at the end of, say, 15 years you would have enough money in your index mutual fund to not only pay off your mortgage, but also have money left over.

So you end up with the same net result. You own your home free and clear in the same amount of time as if you had been making extra mortgage payments, but in the meantime you’ve increased your liquidity, maximized your tax deductions and had money left over. Or, put another way, you end up paying your mortgage off quicker.

So, yeah, if it’s going to take longer than, let’s say seven years, don’t make extra principal payments on your mortgage. Don’t do that bi-weekly mortgage payment program a lot of lenders try to encourage folks to do. Just take that extra cash flow and save it and invest it. You’ll come out a lot better – and worry free – in the end.

Last month, one of my Coffee Talk calls got a little heated!

The topic was “Dirty Little Secrets Annuity Companies Hope You Never Find Out About.” During the Q and A session at the end of the call, this guy called me out for “inciting fear” about annuities.

Actually, to be specific, he said, “you made some pretty critical mistakes in your analysis of the way that fixed index annuities work as far as how the insurance companies are compensated. You didn’t disclose that the Wharton School of Business has evaluated fixed index annuities vs. just about every other possible investment strategy out there for the last 15 years and the fixed index annuity, although it was the safest, actually had the best performance. You were off by probably by as much as 10% on your assessment of commissions. I’m just wondering if the point of this discussion was to educate or incite fear.”

At that point, I asked him if he sold fixed index annuities. Guess what his answer was?

Now, I’m open to being proven wrong. The problem is, when I’m challenged like that, the person doing the challenging usually has a vested interest in (that they sell or represent) the type of product I’m not recommending! So I just want to make it clear that I have no axe to grind, product-wise.

We are a fee-only investment advisory and wealth management firm, meaning we don’t accept or collect commissions from any product of any nature. So if it’s a good investment we want to know about it and make everybody aware of it.

You’ve probably heard the term ‘real estate millionaire’, ‘stock market millionaire’ or ‘business owner millionaire’. But I’ve never heard the term ‘annuity millionaire’…have you?

I also get very leery of anyone who uses ‘research’ from a supposedly credible source as part of their ‘sales pitch’. Usually that source has either been misquoted or was paid for their research by the people using it to support/defend their sales pitch.

There are a lot of junk investments out there that aren’t talked about nearly often enough — and we’re going to start exposing them.

No matter who might be on the other end of the line!

I’ve been getting a lot of questions lately about the oil spill and the situations in Greece, China and Europe. People are wondering how these events are going to affect the market overall, and their own investments.

I think the whole world is concerned about the financial solvency of the European countries. Our accounts have no exposure to Greece and none of any real significance to Europe, while at the same time profiting nicely from exposure to Asia, including China. So I’d say that’s the good news.

Beyond that, it really boils down to an issue of confidence. Pardon me for getting a little bit political here, but if you want to see what the US might look like in 5-10 years if we keep heading down the path we’re headed, I think you just need to look at (the public rioting) Greece – with the new austerity measures and the government being forced to cut back on services. To be honest, that scares me more than looking at Greece and these other countries from an investment perspective.

But again, the bottom line is our investment system has proven itself – and this holds true with the oil spill as well. Money doesn’t disappear; it just goes to where it’s in highest demand. So if world events change and dictate different investment classes are now favored, that’s where the money goes.

Our system has been able to pick up on changes and trends, and we rotate money to the areas that are in highest demand, while trying to avoid the areas that are in weak or falling demand. That is the beauty of our investment system. It takes everybody’s emotion out of the equation, because everybody will have an opinion. Some people will be right and some people will be wrong. And at the end of the day for us, it doesn’t matter. We just want to know where the money seems to be headed to.

Economics 101: if demand is increasing prices will tend to hold, if not increase. We just want to follow that trend. That’s how we’re able to give our clients the stability they’re looking for in volatile times. And yes, we’ll even go to all cash if our un-emotional supply and demand indicators show that’s where the money is going!

On June 21st, Brian was featured in a FoxBusiness.com article titled “When Retirement is Just Around The Corner.” The article was written by Hope Holland, and she spoke with Brian and others about several retirement issues. Below is a link to the article:

http://www.foxbusiness.com/personal-finance/2010/06/21/retirement-just-corner/

What are your thoughts on the article? Leave us a comment below!

We see folks from time to time get fixated on generating income from their investments. They focus on investments that generate interest or dividend income, and that’s how they evaluate their investment accounts. I think this is just a huge, huge mistake.

Several months ago, we got a phone call from someone who had been focused on generating income from her investments. She had put almost all of her money in real estate investment trusts (REITs) at a time when, compared to other investments, real estate investment trusts paid higher dividends than other investments.

So she chose (or was talked into) putting over 70% of her money into these real estate investment trusts. Most of them were not publicly traded and most of them, if not all of them, were probably bought at the high point of the real estate market, certainly before the real estate melt-down occurred.

And you can imagine what has transpired since then. Virtually all of these REITs have cut their dividends in half, if they are paying dividends at all. And this poor woman can’t sell these things even if she wanted to! She can’t find somebody willing to pay her 10 cents on the dollar to reinvest her money or to pull money out to get her income back to what it was in some other form.

Maybe this is an exaggerated example. But people shoot themselves in the foot when they look for nothing but high yielding, high income producing investments. If not all at once, over time they end up allocating most of their money into one or two particular investment sectors or areas. And while it may look good when they first invest, no investment is a top-performing investment all the time.

Much more important is the growth and the increasing value of your account. If your account, over time, increases in value, you can sell off a piece of it and use that money to generate income.

So if you’re concerned about generating income from your investments, the biggest mistake you can make is to limit your search or your selection to only those investments that pay a high yield or a high dividend. The key to success is to have as low-risk as possible investment account or strategy that will give you the growth that you need. That way, you can prune your money tree (or your money bush) and take some of those clippings to create the cash flow that you need.

Our philosophy (my wife’s and mine) was that we wanted to put money in our boys’ hands at a young age. So we gave them an allowance. $1.00 for every year of age per week. So when they were 5, they got $5.00 per week. When they were 15, they got $15.00 per week. And so on.

This was not simply their money to spend as they saw fit. Part of the requirement was they had to give 10% back to church. They had to save at least 10% for long-term savings. Then, with what was left over, they could decide whether they were going to spend it that week or set it aside in short-term savings to build money up for a bigger purchase.

That worked reasonably well while they were young. But as they got older, they kept coming to us saying, “I need new tennis shoes,” or, “Here’s a really cool video game”, or “I’ve got this birthday party to go to.” So over time, we upped their allowance, but made them responsible for buying their own clothes, gifts for all their friends’ birthday parties and going to the movies or out to eat with some friends. We still paid for some clothes for school, but if they wanted to get any wild and crazy must-have style clothing for kids, that was their nickel.

And here’s the beautiful lesson that came out of it. Soon after we instituted this new rule, Adam and his mom were shopping for a birthday gift for one of his friends. He had picked out, I think, a video game for about $25, or maybe $35. So he gets to the checkout stand with Annette, my wife, and she turns to him and says, “ I sure hope you remembered to bring your wallet, get it out and get ready to pay.“

And he was just shocked. He was mortified. So he thought about it for a moment and went and put the video game away. Instead, he purchased a $10.00 gift card from the video store. He decided that would be just fine for his friend.

That was his first lesson on the value of money. For some things, I think life really is the best teacher.

I’ve been talking about a situation that most retired couples are in right now – where one person handles all the financial activities and the other one doesn’t take an interest in it. This is a big mistake many couples make, because if the spouse who doesn’t handle the finances outlives their mate who does, they won’t know what to do with their investments and other money.

Ask yourself now, “What system do you have in place should the uninvolved spouse be the surviving spouse?” “What system and people do you have in place to take care of that surviving spouse so they don’t have to make decisions in an uncomfortable environment that they are not used to making without having you around?”

In my opinion, turning the reins over to a grown adult child is not the best of all systems. Your kids probably aren’t always going to see eye to eye with you, so it’s going to be very difficult for them to put themselves in Mom or Dad’s shoes and give them un-biased, independent, and most importantly, unemotional input. They’re just too closely connected to the family and the situation.

If you are the spouse who handles the finances, it’s time to find and start a working relationship with a trusted financial advisor. It’s important to establish a high trust relationship before anything happens. Don’t wait until after somebody passes away. The time to get that relationship in place is now!

I’m here to suggest that the best approach is to get that trust and confidence level established while you are both still here so you can talk about the relationship with your financial advisor and make sure the spouse that doesn’t deal with financial issues is comfortable relying on that advisor. This makes the transition a heck of a lot easier. There is less emotional stress and strain when your spouse has time to develop a higher level of trust and confidence.

Again, I believe the best approach is that, if you’re working with a professional now, let your spouse get to know them and how you work together. And if you don’t work with a professional, it’s time to find one you both have trust and confidence in.

Never underestimate the value of having an expert ‘do things’ for you that you have limited or no expertise in.

An attorney I know was out of work for over a week (ironically the stock market was up that week) after injuring himself, and when I got the chance to talk to him I asked what had happened. He explained he was in the process of remodeling an upstairs bathroom and on the wall was a huge mirror. Knowing he was going to probably break the mirror when he took it off the wall, he took the time to tape it up to prevent the glass shards from going everywhere. But what he didn’t think about – that a professional likely would have – was where the plumbing pipes were sticking out of the wall.

When he removed the mirror, he lost control of it and accidentally sheared off the ends of the pipes. So he now has water spewing all over the floor. He ran out of the bathroom – which was on the second floor – and headed for the stairs, which were made out of ceramic tiles. Which were now wet. You know what happened next! He wound up falling down the stairs, and while he somehow managed to avoid the mirror, he ended up with two cracked ribs and a bruised kidney.

All this so he could save a little money on a remodeling job!

This story kind of reminds me of the folks who had to go through the 2008 market meltdown on their own. It was the equivalent of them sliding down the stairs, cracking ribs and bruising kidneys.

As we survey and speak with clients and talk with other financial advisors across the country, in general terms, it seems like we ended up doing better than most in the down turn. Losses weren’t as severe and we definitely recovered more quickly compared to what our clients are telling us about their friends and from me speaking to other advisors.

Sometimes, doing it yourself can lead to disaster! Don’t be afraid to bring in the experts when necessary.