Plan B for Your Retirement

Sun Dec 30, 2012 7:00pm EST

Want to execute the perfect retirement plan? Live the perfect life.

In this existence, you would never lose your job. Recessions would never happen. Stock market crashes would occur immediately after you cashed out. You would max out contributions to your retirement accounts starting in your twenties, refrain from having a catastrophic illness and resist sending your kids to expensive colleges.

SEE ALSO: Special Report on Maximizing Social Security Benefits

In my case, I wouldn't be getting a divorce -- and splitting the retirement savings, pensions and home equity my husband and I acquired over a three-decades-plus marriage. We, too, survived recessions, paid for college and lived through career vicissitudes, with hits to our savings. Now, those savings look frighteningly skimpy divided by two.

Whatever the reasons, almost half the baby-boom generation to which I belong is in the same boat. According to a 2012 survey by the Employee Benefit Research Institute, 60% of respondents age 55 and up had less than $100,000 in retirement savings, and 40% had less than $25,000. I imagine we'll all walk into a bank someday and stick up the teller for eight times our final salaries -- the amount we should have saved, according to the latest formula from Fidelity, had we not been otherwise engaged.

Or we'll work forever (so we think). In a recent survey commissioned by Wells Fargo, one-third of middle-class Americans said they'd need to work until at least 80 -- 80! -- to have enough money to retire. The reality is that nearly 60% of people who are now 65 are already retired, according to MetLife, and at least half of those people left the workforce because of a job loss or health problem.

Make a plan. But let's focus on the doable, not some formula or time frame that many of us are plainly not going to achieve. "Whether you're 60 or 40 or 30, you need to ask, what plan am I on right now?" says Laurie Nordquist, director of Institutional Retirement & Trust at Wells Fargo. "It's about taking small steps versus 'I can't do anything.' "

For me, the first step was to see how much more I could carve out for my retirement savings. For once, the numbers worked in my favor. Because my children are now adults, I'm neither saving for college nor paying for it. And because I'm over 50, I can contribute not just the $17,500 annual maximum (for 2013) to my 401(k) but also $5,500 in catch-up contributions. With an IRA, I can kick in $5,500 annually plus up to $1,000 as the catch-up amount.

Assuming I'm able, I'm also planning to work past my retirement age (although I definitely plan to be lounging with my cronies by the time I'm 80). Each year I delay taking Social Security past my 66th birthday, I will boost my benefits by 8%, until I reach age 70. Working longer will also give my investments more time to grow and reduce the length of time that I'll be living off savings. "It's the one thing you can do that has the most benefit," says Joe Wilson, a wealth-management adviser with TIAA-CREF in Atlanta.

Once I do leave my full-time job, I'd like to continue doing what I love -- writing -- and make a little money at it, postponing Social Security until I'm 70, when I'll get the maximum benefit. "People think of retirement as a point at which everything changes," says John Ameriks, a principal at the Vanguard Group, "but as they get closer, it becomes less all-or-nothing. They find it's more a slope than a precipice."

"Slope not precipice" sounds good to me, but I'm also counting on what Wilson calls "the MacGyver strategy," based on the '80s TV action hero. "MacGyver would find all these household trinkets and put them together to get out of sticky situations," he says. "The MacGyver strategy is putting together whatever you have to make retirement work." I like the idea of being an action hero, and I'm sure I can put together gadgets like crazy, given the right instructions. It might even be kind of fun. (Editor's note: Take The MacGyver Money Quiz to learn how to escape some other tricky financial jams.)

Jane Bennett Clark is a senior editor at Kiplinger's Personal Finance.

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