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Manage your money.
You can still have the retirement that you want—just don't count on your employer or Uncle Sam to get you there. In our annual look at retirement, FORTUNE walks you through the smartest investments, finds the best places to live out your golden years, and points out the ways even your best-laid retirement plans can go awry.
Retire Rich: Take control of your Future.
It has not been the sort of year that makes you breathe easy about retirement. United Airlines got permission from a judge to default on $6.6 billion in pension commitments. The government’s Pension Benefit Guaranty Corp., which picks up some of the burden when companies like United fail, is in need of a taxpayer bailout itself. President Bush declared in his State of the Union address that Social Security was "headed toward bankruptcy." Ford announced that it was suspending matching contributions to the 401(k)s of its salaried employees. Even state and local government pension funds, those bastions of old-style retirement generosity, ran into money troubles and political headwinds.
Get real about your future.
Retirement planning isn’t rocket science, but it isn’t as easy as it used to be. Among the challenges: a stagnant stock market, low interest rates, and looming cutbacks in Social Security and private pensions. To help you sort through these difficult issues, FORTUNE’s Julia Boorstin assembled a panel of top-flight investment thinkers: Alison Deans, chief investment officer at a private-investment division of Lehman Brothers; Harold Evensky, of the financial-planning firm Evensky & Katz in Coral Gables, Fla.; Jeremy Siegel, finance professor at the Wharton School of the University of Pennsylvania and author of Stocks for the Long Run and The Future for Investors; Allen Sinai, chief economist and strategist of Decision Economics in Boston; and Quinn Stills, the founding partner of Palisades Investment Partners, a pension-management firm in Santa Monica, Calif. While their overall outlook is sobering, they offer a lot of valuable guidance that can help you achieve a prosperous retirement, despite the obstacles. Here are edited highlights of the panel’s conversation.
Can't retire early? Be Happier at work!
With Americans living longer and saving less for retirement, many of us may have to work past 65. An expert tells how to attain work-life balance and be more content—even in old age. The refrain that runs through many of our heads during our working lives goes something like this: "I'll work really hard now, putting in such long hours that there's no time to pursue other interests or take really good care of myself, because at some point I'll retire completely and not have to work at all anymore. Man, won't that be great—whenever it finally happens.
Three threats to your retirement
Even the most diligent savers and savviest investors may face serious challenges to their financial health in retirement. Here are five of the most significant threats that you may not have fully factored into your planning—and what you can do about them.
Lower Stock Returns Solution: Stocks are still your best bet, but reduced returns mean that you'll have to save more and pay closer attention to investing costs that you can control, like fees and taxes.
Inflated Inflation Solution: Treasury Inflation-Protected Securities are safe investments that are guaranteed to keep pace with the CPI. (It's better than nothing). Most important: Be realistic about how much money you'll need to maintain your standard of living in retirement.
Piddling Interest Rates Solution: Dividend-paying stocks offer some relief, with many strong companies yielding 3% or 4%. And those payments are taxed at a lower rate than the interest on bonds. Also, stick with term bonds, so that if rates do rise you can get into new bonds with fatter yields.