The best way to save for retirement is to follow the usual advice: save more, long longer, delay Social Security and so on. But experts also say there are many little-known retirement tips worth following, too. Here's a look at 10 such tips that advisers say you shouldn't overlook.
1. Forget 'The Number'
You are more than welcome to go about your life worrying whether you've saved enough -- say $1 million or $2 million -- to retire. But that's not the number you should focus on, said Wade Pfau, an economics professor at the National Graduate Institute for Public Policies in Japan and a frequent blogger on retirement issues. "There is no such thing as a specific wealth number that will suddenly allow you to retire," Pfau said. "The income stream your wealth can support matters much more than how much wealth you have. The income stream supportable by a given amount of wealth varies with interest rates and other factors."
2. Don't rely too much on the 4% rule
Speaking of income, David Blanchett, a research consultant at Morningstar Investment Management, said taking out 4% from your retirement accounts might be a good starting place for an initial withdrawal rate. "But revisit this withdrawal amount regularly, ideally on an annual basis, to make sure whatever the target income goal is still achievable," he said.
3. Think tax-efficient income
Think also about the tax efficiency of your retirement income, Blanchett said. Dividends, for instance, can be far more tax-efficient than bonds from an after-tax income perspective if they are qualified -- that is, taxed at a maximum rate 15% vs. 35% for ordinary income. That's yet another reason to hold them in an after-tax account.
But don't think only about generating tax-efficient income in retirement. Consider your withdrawal strategy from a "happiness" perspective. "Ignoring required minimum distributions rules, common tax wisdom suggests drawing from taxable accounts first, then a Traditional IRA, and finally from a Roth IRA," Blanchett said. "I think this makes sense and can definitely increase the available income, but it's also important to have some 'tax diversification' with respect to withdrawal moneys."
4. Social Security is a household decision
For married couples, research the various ways spouses can take Social Security, said Pfau. "The week spent studying this matter could result in hundreds of thousands of dollars worth of extra lifetime Social Security benefits," he said, noting that it's not usually a good idea for both spouses to begin Social Security as early as possible.
5. Asset allocation matters
Consider, too, which accounts house which investments. Blanchett refers to this "asset location," the tax-efficient placement of your investments. "Retirees typically transition to more conservative portfolios, and it makes sense to try and keep as most bond moneys -- as reasonable -- in a tax-deferred account such as a Roth IRA or traditional IRA to minimize taxes," Blanchett said.
6. 'Through,' not 'to' retirement
Make your investments work "through" retirement, not just up to retirement, Blanchett said. Start to transition your portfolio before retirement and avoid making the largest shifts at retirement. Blanchett also recommends meeting with a financial adviser who can help transition your portfolio for retirement.
7. Get multiple quotes
Get multiple quotes before buying any product or anything that involves a commission. That's especially so because many products designed to produce income in retirement will typically "lock up" the retiree's money with a surrender penalty or charge, Blanchett said.
8. Plan for a long life
Life expectancy to age 75 is for someone just born. But it's not for someone who is 65 years old, said Blanchett. In fact, according to the Society of Actuaries 2000 Annuity Table there is a 17% chance a male age 65 will live to age 95 there's a 23% a female age 65 will live to age 95, and there's a 36% that either member of the joint couple will live to age 95.
9. What's the point?
When thinking about your income, or your long life, think also about the end game. "You'll need goals in retirement," said Andrea Bulen, a financial planner with Paula Hogan. "Retirement is not necessarily an end, but a beginning. Set those goals and plan out what you will need to do to achieve them. Is your retirement income sufficient to meet those goals?"
Also, consider how you will change your lifestyle in retirement, not just from a monetary perspective, but what will your day-to-day life feel like? "What would an ideal week in retirement look like?," Bulen asked. "What will an ideal week in retirement look like for your spouse? Are those weeks compatible?"
10. Control those fears
Plenty of spouses go through life not talking about sex. They also go through life not talking about their fears about retirement, according to Bulen. Do you or your spouse have fears about retirement that you haven't discussed? If so, start talking about them before it's too late.