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7 Ways to Beat the Retirement Draw-Down Blues

Match your investments to your goals and needs.
As you begin to rely on your investments for income, you may feel most comfortable investing heavily in income-generating bonds and CDs. But to counteract the long-term effects of inflation, you may need to keep a portion of your savings in growth-oriented stocks as well.

Cover essentials with predictable income.
Divide your expenses into essential and discretionary categories and cover the essentials with predictable income sources. Don't be afraid to tap into principal.

"One of the steps is to sort your expenses between essentials versus non-essentials and then have a draw-down strategy that uses your predictable income to cover for essentials, such as housing and utilities food," Schwab-Pomerantz says. "That predictable income can be interest off a bond or when a bond matures and you know when it's going to come."

To supplement your predictable income sources such as dividend and interest income, Social Security, pension payments and rental income, consider drawing money from your retirement portfolio in this order: Start by drawing principal from maturing bonds and CDs; Take your required minimum IRA distribution if you are 70.5 or older; Sell overweighted assets in your taxable accounts; Sell from your tax-advantaged accounts starting with traditional IRAs, then Roth IRAs. "There are strategies to be had," Schwab-Pomerantz says. "If you have a traditional IRA versus a Roth IRA you might do one first versus the other, depending on what your strategy is."

Rebalance annually to stay aligned with your goals.
Annual portfolio rebalancing is especially important when you're retired, not just during the accumulation phase. There's less time to recover from the potential losses of lackluster returns caused by a portfolio that has strayed from your chosen asset allocation.

Stay flexible and re-evaluate as needed.
Things change. Situations change. Markets change. Priorities change. It's important to periodically revisit your portfolio asset allocation to stay aligned with your broader investment goals.

Schwab-Pomerantz stresses that even for those five years away from retirement, there is still time to right their financial ship.

"It's not too late," she says. "We are seeing, culturally, that baby boomers don't think of sitting in a rocking chair and knitting. They are thinking of second careers and working part time, still being viable and productive. So, there is time to build income. There is time to balance out that portfolio, get that cash stream up. Also, retirement today could be a 30-year endeavor, and you can do a lot in 30 years."

"You don't get a lot of chances to change your retirement outlook," Schwab-Pomerantz adds. "The sooner you can start thinking about it and working on it, the better it will feel and the more choices you will have later in life."

-- Written by Joe Mont in Boston.

>To contact the writer of this article, click here: Joe Mont.

>To follow the writer on Twitter, go to http://twitter.com/josephmont.

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