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Building a happy retirement

Simple, long-term money decisions will help your golden years go smoothly

Consumer Reports / March 6, 2011

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Now is a good time for consumers to begin planning a future that’s secure, and it may mean creating a lifestyle that doesn’t place money at its core.

The Consumer Reports National Research Center recently surveyed online subscribers age 55 and older, and found some common keys to satisfaction and peace of mind that have little to do with big salaries or high living.

Notably, retirees with regrets about the past actions were less likely to be highly satisfied than those without regrets. Fifty-seven percent of retirees in the survey said they have regrets about financial decisions they made. Twenty-one percent of retirees wished they had taken better care of their health, and nearly as many (19 percent) regret not developing lasting interests and friendships.

Consumer Reports offers ways to ensure folks don’t run out of money on their way to personal satisfaction. They include:

Live modestly
Even when times improve, living within your means has benefits. Retirees who were most satisfied with their situation credited living modestly as among the best steps they’d taken.

Keep to a budget
At its simplest, a budget involves splitting your expenses into have-to’s and want-to’s, and paying the have-to’s first. Setting some short- and long-term spending goals may make it easier to stick to your plan.

Start saving early
The survey found that retirees who began saving and planning early — say, in their 30s —had a greater net worth: $1.1 million on average, compared with $868,000 for those who waited until their 40s, and $651,000 for those who started later. Thirty-nine percent of retirees said they regretted waiting to save.

Diversify your holdings
Having a variety of investments — stocks, bonds, and real estate, among others correlated highly with net worth in the survey, regardless of income level. Retirees with seven or more types of investments had an average net worth of $1.4 million. Those with three or fewer had an average net worth of $678,000.

Prioritize retirement over college
You can borrow money for a college education, but you can’t borrow toward your retirement. It’s fine to start a 529 savings plan for your kids, but make funding it a secondary goal.

Stay in the game
Fidelity Investments’ study of the balances of its 401(k) participants age 55 and up found a real benefit to perseverance. On average, those who continuously contributed to their plans doubled their account balances over the past 10 years.

Pay off debt
Accelerate payments on your mortgage with an eye toward paying it off by retirement. That might seem counterintuitive, given the past year’s market performance, when putting extra cash in the S&P 500 would have provided better returns. But given the market’s ups and downs, that strategy can backfire. Just as you’re ready to retire, you could be stuck with losing investments and a mortgage still to be paid.

Work longer
Twenty percent of survey respondents worked part time in retirement; 37 percent of that group said they needed the money. But psychic benefits of employment also were important. More than half said working made them feel useful; 38 percent said they enjoyed work too much to give it up.

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