In Your 50s? Retirement Saving Is a Marathon

BOSTON (TheStreet) -- Marathoners often refer to miles 18 through 22 as the hardest part of a race, because it's when when most runners "hit the wall." At this point, their stores of glycogen have plummeted and they experience dramatic fatigue until the final phase of the race, when adrenaline kicks in again to pull them across the finish line.

Saving for retirement is a marathon, not a sprint, and if that's the case, many investors "hit the wall" in their 50s. While retirement beckons, the finish line is not quite close enough to fully relax and assume the final phase of the race is in the bag. Like runners in a marathon, most of us heading toward retirement in our 50s need to carefully plan our route, re-evaluate strategies along the way and possibly adjust expectations to make sure we have what we need to get to the finish.

Saving for retirement is a marathon, not a sprint, but many investors "hit the wall" in their 50s.

First, take a close look at where you are by measuring your cash flow and net worth. Whether you decide to use a robust software program such as Quicken ( INTU), an online service such as Mint or a good ol' pencil and paper, calculate your monthly income and expenses, as well as your assets and liabilities, and determine whether you need to adjust your level of spending and the amount you are saving.

When analyzing how much in retirement savings you will need, it's a good rule of thumb to use 5% as a safe withdrawal rate from a typical 60% stock and 40% bond investment portfolio. Using these assumptions, if you have $1 million in retirement savings at age 65, you would be able to withdraw $50,000 annually and still have the account continue to grow and keep up with inflation. If you think you'll need to withdraw more than that during your retirement years, you may need to adjust your goals and accumulate more in savings while you're working.

Second, focus on what you can control. Runners in a race cannot control the weather, a sudden leg cramp or the runner next to them, but they can choose the clothing they wear, the stretches they do before the race and their own running pace. The same holds true with retirement. While you have no control over interest rates, housing prices or the values of the stock you own, you can control many other aspects of your finances, such as the level of risk you take, the expenses you incur and, to some extent, the taxes you pay.

Generally speaking, in achieving your desired rate of return, you want to reduce portfolio volatility or the risk of the portfolio as much as possible. This is because the less dramatically a portfolio fluctuates, the easier it is to achieve that desired rate of return over the long term. To illustrate, if you had $100 in an account that grew 20% in one year but dropped 15% the following year, at the end of Year 2 you would have $102 left. If that same portfolio was less volatile, growing only 15% the first year but dropping only 10% the second year, the account would have a higher balance -- $103.50.

You can also take measures to lower investment expenses and fees, as well as implement strategies to reduce potential taxes. Take the time to evaluate the mutual funds and other investment products you own; the average investment management fee of mutual funds is about 1%, so you would need a compelling reason to pay anything above this amount.

Despite the recent extension of lower ordinary income and capital gains tax rates, it's also a good idea to identify ways to reduce the tax liability of your investments. For example, try to place tax inefficient investment products that generate a lot of income, such as certain bonds and REITs, in tax-deferred accounts such as an IRA or qualified retirement plan rather than in taxable accounts.

Of course, implementing all of these strategies takes time and effort, and you may decide it makes sense for you to seek help from someone on the sidelines, such as a financial planner. If so, make sure the adviser is a fiduciary -- required by law to uphold strict ethical standards that place your interest above their own when providing advice.

When you think of a fiduciary, most people think of a doctor or lawyer, but certain financial advisers are fee-only fiduciaries who are held to the same high ethical standards. You can find a listing for your area through the National Association of Personal Financial Advisors. Such an adviser can act as your coach, helping you to review your cash flow, net worth, retirement income needs, risk tolerance level, investment fees and tax strategies and ensuring that you finish the retirement savings marathon a winner.

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Greg Plechner is a CFP and a principal at Modera Wealth Management LLC, based in Westwood, N.J., and Boston and a member of NAPFA, the National Association of Personal Financial Advisors.

This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management. Nothing contained in this blog should be construed as personalized investment, financial planning or other advice, and there is no guarantee the views and opinions expressed herein will come to pass. Investing in the stock and bond markets involves gains and losses and may not be suitable for all investors. Information presented herein is subject to change without notice and should not be construed as a solicitation to buy or sell any security or engage in any particular investment strategy. Modera is an SEC-registered investment adviser. For more information about Modera, including registration status, fees and services, refer to the SEC or call (201) 768-4600.

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