2 do's and 8 don'ts for boomers planning retirement

There's still time, though less of it, even in your 50s

By Gary Foreman

The New Frugal You

Gary Foreman is a former financial planner who currently edits The Dollar Stretcher website and newsletters. He writes "New Frugal You," a weekly Q&A column about frugal living, for CreditCards.com Ask a question. 'New Frugal You' archive

Dear New Frugal You,
I'm a baby boomer and concerned about retirement. I thought I could depend on my house and 401(k) to supplement Social Security, but after the past four years I'm not so sure. I'm only 50, so I probably can recover. Can you help me get to a comfortable retirement? -- Robert

Dear Robert,
You're right to be concerned about your retirement. It's very likely that the rules for retirement will be rewritten in the next 10 years. The concept that everyone retires in their mid-60s and never works again is obsolete. Recognizing that now and making adjustments could make a big difference in your future lifestyle.

It's widely agreed that the Social Security trust fund is running out of money. If the current funding and payout system stays the same, Social Security's reserves will be exhausted in 2033, according to the Social Security Administration. After that, taxes will only support about 75 percent of scheduled benefits.

So unless taxes are raised on younger workers, your benefits will be cut. That means a greater reliance on what you've managed to accumulate in private pension plans, 401(k)s, IRAs and equity in your home.

There's no one single thing that you can do to guarantee a comfortable retirement. But there are a number of lifestyle choices and decisions that you can make that will make a big difference in building a retirement nest egg.

• Do remember that $1 today will be worth more at retirement. Every dollar you save now will benefit from the multiplier effect of compound interest. Depending on how soon you need it, that dollar could be multiplied two, four or even eight times.
• Don't let pride of ownership lure you into buying overly expensive autos or trading up too frequently. The salesperson always wants to put you into a new ride. Don't listen. Better to buy a vehicle with lower status and keep it until repairs exceed the value of the car.
• Don't let your children's or grandchildren's college deplete your retirement savings. Yes, you rightfully believe in education and want your offspring to have the greatest range of life choices. But, by not helping them pay for an overly expensive school you're doing them a favor. You're forcing them to consider both the cost and benefit of their degree choice. They're less likely to choose an unmarketable major. A bad major could haunt them for years.
• Don't let "living large" today cause you to live very small later. We're awash in premium products. Everything from our breakfast cereal to the home we live in. And luxury products are much more expensive than the more typical choices. All those premium choices add up and deplete your savings, too.
• Don't enable others in their financial bad behavior. We all want to help friends and neighbors who have been hurt by the recession. And we should help when we can. But, if we're giving or lending money to someone who's not making an effort to bring their expenses in line with income, we're just delaying the inevitable. Sooner or later they'll run out of money, both theirs and ours.
• Don't overreach trying to make up for recent losses. Your home may have lost 30 percent of its market value in the recession. It will take decades before you see those prices again. Don't try to try to adjust your investments to make that up quickly. You'll be taking on unnecessary risk. You're still young enough to invest for the long haul.
• Don't panic over changes in your retirement portfolio. Markets will move up and down. After taking some losses it's tempting to pull everything out. Don't do it. Barring bad fortune, you can expect to live into your 80s. That leaves plenty of time for a balanced portfolio to recover losses.
• Don't underestimate your target. One rough tool used by planners is that you can safely take 5 percent of your savings each year. So for every $10,000 in income you want, you'll need to save $200,000.
• Don't assume a traditional retirement. Begin to consider what your retirement might look like. Many boomers are choosing to continue to work part-time or to start an entirely different career. In some cases they're beginning to lay the foundation now. There will be more options available for boomers as they get into their 60s.
• Do take a look at your lifestyle and behaviors to see what might be keeping you from preparing for a comfortable retirement. Saving for retirement isn't an impossible challenge, even if you've taken a hit in the most recent recession. The trick is to remember that it's not a sprint. It's a marathon. Make a little progress every month and you'll cover a lot of ground in 10 or more years!

See related: Help! My savings don't match my retirement goals, Retirement in sight? Balance your risk tolerance, need for growth

For more than 35 years, Gary Foreman has worked to help people get the most for their money. Prior to founding The Dollar Stretcher.com, he was a financial planner and purchasing manager. Gary began The Dollar Stretcher website and newsletters in April 1996. Today the website features more than 6,000 articles on different ways to live better for less. Gary has been interviewed by The Wall Street Journal, The Nightly Business Report, USA Today, Reader's Digest and other newspapers and magazines. Gary answers a question about a budgeting or saving issue from a CreditCards.com reader each week. Send your question to The New Frugal You.

Updated: March 14, 2013

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