Many older Americans face an ugly reckoning right now: To retire on time, they ll need to increase what they save by as much as 80 percent. But savvy investors are figuring out how to close the gap by turning their savings into extra income. In its May issue, SmartMoney magazine offers a guide to keeping the cash flowing.

Some advisers are pressing their clients to do something that would have been unthinkable for older investors a generation ago: invest abroad. Currently, the average exposure to international stock funds in 401(k) plans is just 7 percent, according to the Profit Sharing/401(k) Council of America. But most wealth managers have been gradually increasing the recommended exposure over the past several years and now suggest even for investors who have already retired that between 20 and 30 percent of the stock portfolio be held in foreign shares.

The foreign tilt shouldn t stop with stocks. With the 10-year Treasury currently paying a relatively paltry 3.6 percent, strategists are pushing investors to diversify their bond portfolios beyond the U.S. market. The yield on government debt in most European and developed nations is currently close to that of Treasurys, but Australia s 10-year bonds, for example, are yielding 5.7 percent. Long-term bonds in many developing nations, such as Brazil and Indonesia, are yielding at least twice what those in the U.S. are, and their prospects look attractive. If you view countries like companies, many emerging-market economies deserve to be considered investment-grade credits, says David Donabedian, chief investment officer at Atlantic Trust Private Wealth Management, in Atlanta. They have central banks with fiscal surpluses, he explains making the risk of default much lower.

There s one big catch in investing in foreign bonds: Your yield can take a hit if the dollar s value rises against, say, the Brazilian real or Indonesian rupiah. That s why most advisers steer their clients toward diversified funds that hedge this so-called currency risk. Mark Cortazzo, a financial adviser at Macro Consulting Group in Parsippany, N.J., recommends the hedged Pimco Foreign Bond fund and the Templeton Global Bond fund, which have earned 6 percent and 10 percent a year, respectively, over the past five years.

The Cash-Rich Retirement:
* Intro * Diving for Dividends * Investing Overseas * The Annuity Option * CDs With a Kick * Trimming Taxes and Fees