Make Your Money Last Forever

We outline the six vital steps you should take to guarantee you'll never outlive your savings.

Editor's Note: All three personal finance magazines -- Kiplinger's, Money and SmartMoney -- featured stories about making your money last in their October issues. However, New York Times columnist Paul B. Brown wrote in the October 7 edition: "Mary Beth Franklin does the best job at laying out the basics in Kiplinger's." Read Mary Beth's story below to see why her advice is winning praise as the best.

The oldest baby-boomers are nearing retirement's homestretch, yet many of them still don't know whether they are saving enough or how to convert those savings into a lifetime of income. If you're one of those 41 million boomers who are now 50 to 60 years old, the next five to 15 years will be critical. That's when you'll need to top off your retirement savings, focus your investment strategy and figure out how to maximize your income after your paychecks stop.

For many people, work remains an important part of their lives -- financially as well as personally -- even after they retire. Michele Sabatier's pension from the National School Boards Association, where she worked for 18 years as a graphic designer and art director, will buy her the freedom to pursue a new career as a teacher. After resigning from the association earlier this year, Sabatier plans to trade a two-year commitment with the Mississippi Teacher Corps for a free master's degree in education at the University of Mississippi. When the two years are up, she can apply to teach anywhere she likes. "I had reached an age where I wanted to do something different with my life," says Sabatier, 51.

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Now that her only child has graduated from college, she's eager to move from northern Virginia to a less-expensive area. She plans to take her pension as a lump sum -- a wise move because she is divorced and a monthly benefit would only be passed on to a surviving spouse. "I can't imagine doing absolutely nothing," Sabatier says about her ambitious plan for the next phase of her life. "I think it's interesting how our retirement will be so different from that of our parents' generation." If you want your retirement to be ideal as well as different, these strategies will get you off to a good start.

1. Get a Checkup

As your priority shifts from accumulating money to shepherding it through retirement, you'll probably benefit from some financial guidance.

2. Set Your Budget

The possibility of running out of money is the main reason financial advisers urge you to limit your first year's withdrawals to 4% of your total retirement funds.

3. Do a Dry Run

Before retiring, see if you can live on your projected retirement cash flow for two to three years.

4. Choose Your Date

The age at which you retire depends on several factors, including whether you will continue you to work.

5. Consider an Annuity

An immediate annuity can guarantee you income for the rest of your life.

6. Roll It Over

In most cases, you will be better off moving your 401(k) money to an IRA when switching jobs or retiring.

Investing in Retirement

Here are two ways to balance safety and income with growth.

Extreme Early Retirement

One couple share their secret for calling it quits in their thirties.

Mary Beth Franklin
Former Senior Editor, Kiplinger's Personal Finance