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Safe and Smart Retirement-income Planning

Smart retirement-income planning makes all the difference between a comfortable retirement and a truly enjoyable one. Whether you're just starting your career or nearing your retirement, it's worth taking a look into how the investments that are part of your retirement-income planning are allocated and are able to be shifted around your plans to suit your needs. These tips help you allocate your retirement resources to optimize your retirement income.

DO: Maximize 401k, IRA and other tax-free contributions

Contributions to any type of tax-free retirement fund are good ideas at any stage of retirement planning, especially if you work for a company that matches some or all of your investment. Not contributing to at least the matching level is ultimately leaving money on the table, and the tax benefits in the long run add up as well.

DO: Diversify your investments

It's not wise to put all of your eggs in one basket, and this is especially so when it comes to retirement planning. Investments in a single company or other holding leave your retirement income vulnerable to a single bad event. Make sure your portfolio is broadly spread to maximize its resilience.

DON'T: Be unrealistic about your retirement needs

Your life in retirement is likely to cost less than your life now, but don't be unrealistic about how much money you need. It's important to take into account the likely trajectory of inflation, some buffer for bad events, and any special trips or other events you dream of taking. Given these factors, it's better to overestimate your needs and invest and save accordingly. Making some assumptions about a likely rate of inflation and an expected return of your portfolio from historical trends also helps you get a solid picture of how much you need to earn to maintain the income you need.

DON'T: Leave your portfolio risk static over time

Early in your retirement planning, you opt to take riskier plays on stocks or other investments. Conversely, it's important to begin shifting resources toward more stable assets such as index funds or bonds as you near retirement. Your primary objective is not to miss the possibilities for profit early in your career or jeopardize your hard-earned gains as you near retirement. A static allocation of investments can't accomplish both these ends.

Retirement-income planning isn't an exact science, but these tips help you evaluate your current strategy and fine-tune it to suit your current situation and a realistic retirement-income goal. Maximize your potential income by taking full advantage of tax incentives and matching, diversifying your investments, and adjusting your risk appropriately.

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