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How to map the road to retirement

Can you imagine going on an extended vacation without making any plans?

No websites or tour guides consulted. No hotel reservations made. No itinerary mapped out.

Of course not. You’d budget enough money to cover your costs. You’d know when you were going, how long you could stay and what you would do while there.

But when it comes to the longest vacation most people will ever take — retirement — fewer than half of all Americans have a formal plan.

There’s nothing worse than being 85 years old, full of life, and being flat broke. And it takes work to avoid the pitfalls that can ruin your golden years. Inflation, taxes, bad health and bad investments can be devastating.

Here are some tips for getting started:

• Get everybody on board. You and your spouse need to agree on your retirement goals — and the financial decisions that will get you there. Start talking about priorities: Do you want to relocate? Stay close to the grandkids? Are you emotionally and physically ready for retirement? How long will each of you keep working, and how will that affect the income streams you’ll rely on when those paychecks stop?

• Make a budget. Most people think their expenses will go down after they retire, but usually that doesn’t happen. Your wardrobe budget might go down, but other expenses might go up if you travel, enjoy new hobbies or start going out more for dinner, movies and concerts.

• Know where your money will come from. Income is king when it comes to retirement planning. A pile of scattered paperwork and account statements is not a plan. A good adviser can help you maximize your Social Security benefits, come up with a tax-efficient distribution strategy and talk to you about other options, such as annuities, that can guarantee income. This is vital as people now live 20, 30 or even 40 years after retiring.

• Know your retirement timeline and reevaluate your risk tolerance. One big mistake investors nearing retirement make is sticking with the same adviser and portfolio they had when they were younger. You’ll need to move to a more diversified approach, with fewer risks and more protection for that all-important income.

And retirement is about more than money. There’s also the adjustment from working every day to suddenly having too much time on their hands. Perpetual Saturdays are exciting for about a week. Maybe you’ll find ways to volunteer. Maybe you’ll learn to paint or play guitar. Maybe you’ll end up working part-time. Keep in mind that most people need something in retirement to keep them engaged and excited about life.

Randy Becker is a retirement planner and co-founder of the Becker Retirement Group in Bellevue, Wash.

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