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Stop freaking out about retirement

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In a recent survey of more than 24,000 Consumer Reports subscribers ages 55 to 75, only 29 percent within five years of retirement expressed a high degree of satisfaction with their retirement planning. But 74 percent of already-retired readers said their expenses were in line — or less — than what they expected before retiring.

Consumer Reports suggests these ways to plan for a secure future and worry less.

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Start by being realistic. To get a preliminary read on your retirement needs, use an online calculator. A comprehensive one Consumer Reports tested is the free “Retirement Income Calculator” on investment company T. Rowe Price’s website.

An important figure to enter is the percentage of income you’ll need in retirement. One-third of retirees reported no change in their spending in the year they retired, but 44 percent said their expenses were lower. Once you have an estimate, talk with a financial adviser. Consumer Reports recommends finding a fee-only planner at websites such as Garrett Planning Network.

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Play catch-up the right way. Even if you’re far behind, you can still get a foothold. Making the maximum contribution to a 401(k) or 403(b) account will build savings fast. Contributing $10,000 per year from age 50 through 55 would add about $192,000 to your portfolio by age 67, given a historical average annual rate of return for a 50-50 mix of stocks and bonds. (A more conservative portfolio of 80 percent bonds, 20 percent stock would grow by 5.5 percent to almost $131,000.)

Try to delay claiming Social Security. Waiting to claim benefits is the best guaranteed retirement savings plan around. Workers who delay filing until their full retirement age — 66 for those born between 1943 and 1954 — increase their monthly benefits by 8 percent per year until age 70, or 32 percent over four years. Filing early, however, reduces benefits. A worker whose full retirement age is 66 would have his monthly check cut by 25 percent by filing at 62, the earliest age for eligibility.

Expect the unexpected. Many costs later in life are likely to be health related. Longevity insurance is a type of annuity that can address that challenge. You pay a single insurance premium up front early in retirement. Then, when you reach the age you have chosen to begin payouts, the policy provides a regular monthly amount for the rest of your life.

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Consider a gradual retirement. One option is starting retirement by working less, not stopping entirely. Laboring longer provides more income and delays when you begin withdrawing from savings, allowing more time for growth.

Be aware, though, that part-time work can have an impact on Social Security. If you haven’t reached full retirement age but have started collecting your benefit, Social Security keeps $1 for every $2 you earn above $15,480. When you reach full retirement age, however, it adds that deferred amount to your monthly benefit payment.

In addition, working shorter hours at the same employer could affect pension benefits or employer health insurance, so check with human resources.

Have a Plan B. Most preretirees assumed they would work after retiring, but only a third of retired survey respondents said they actually did. Health concerns or the needs of a partner might interfere. You might need to adjust your expectations and your budget.

Smell the roses. Consumer Reports found that retirees with less than $250,000 in savings who were highly engaged socially were more satisfied than retirees with $1 million or more who were not. Numerous studies have found a connection between social engagement and better cognition in elderly people.

Consumer Reports writes columns, reviews, and ratings on cars, appliances, electronics, and other consumer goods. Previous stories can be found at www.consumerreports.org.
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