Countdown to Retirement: How an Adviser Can Help You Plan

As you approach the day you begin the next phase of your life, you face a series of decisions that could spell the difference between a comfortable retirement and one fraught with financial stress. Even if you have been managing your money for years, you may need professional help now. Depending on your circumstances, you could get by with perhaps a couple of sessions with a financial planner to tweak your portfolio and review your major options—or you may need ongoing help that lasts into retirement.

You can find certified financial planners in your area at www.cfp.net/learn. The Web site includes information about how the planners are compensated and profiles of typical clients. You can also find names of fee-only planners at the National Association of Personal Financial Advisors.

Take your pension as a lump sum or an annuity? Taking a lump sum allows you to invest the money as you choose; an annuity provides a lifetime stream of payments. Both options have their pluses and minuses. A lump sum invested in an IRA may provide a higher return than an annuity, but you also risk outliving your money (see Countdown to Retirement: Plan Your Exit Strategy).

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Select a single-life immediate annuity or survivorship? If you're retiring without a pension—and that's increasingly common—converting part of your savings into an immediate annuity is a way to lock in a monthly payment for the rest of your life. But as with a pension, you'll need to choose between a single-life option, which offers a higher initial payout, and an annuity that will provide income to a surviving spouse. Similarly, you'll need to decide whether to buy an annuity that's adjusted for inflation, which provides a lower initial payout but will preserve your purchasing power.

Best strategy for portfolio withdrawals? Until now, your main focus has been saving as much as possible. Soon, though, you'll need to start taking withdrawals, using strategies that ensure your money will last for two or three decades. The order in which you tap your accounts could have an impact on your retirement income, and there's no one-size-fits-all answer, says Andrea Blackwelder, a certified financial planner in Denver. For example, you may want to tap taxable accounts first to allow your tax-deferred accounts to compound unfettered by taxes for a longer period. But if you expect your income tax rate to rise in retirement, you may want to tap your tax-deferred accounts first.

When to file for Social Security? For single people, the cost-benefit analysis is straightforward: Accept permanently reduced benefits by filing at age 62, or wait until full retirement age (66 for those born between 1943 and 1954) or even later in exchange for a higher monthly benefit. But couples have a range of options based on their life expectancies, earning histories and future survivor benefits, says Eleanor Blayney, consumer advocate for the Certified Financial Planner Board of Standards. (You can get help with developing a plan using Kiplinger's Social Security Solutions.)

Pay off the mortgage? Many retirees long for the security of a paid-off mortgage, but at today's low interest rates, it doesn't always make sense (see Why a Long-Term, Fixed-Rate Home Loan Makes Sense). If you're paying 3.5% on your mortgage, you may be able to earn a higher return by investing the money.

Haven't yet filed for Social Security? Create a personalized strategy to maximize your lifetime income from Social Security. Order Kiplinger's Social Security Solutions today.