Every now and then I get an email from a reader that goes like this:
"I'm 61. I only have $[not a lot] saved for retirement. What can I do?"
Fortunately, the answer doesn't have to be, "Suck it up and live on ramen noodles during retirement," or "You have to get a job as a greeter."
If you're approaching retirement and your savings is thinner than you'd like, there are creative ways to add to the pile -- and ways to make what you do have last longer, without excessive scrimping and without having to work until you drop.
First, here are some things you should not do:
Invest too aggressively. I have heard a few stories of people nearing retirement who, in a fit of desperation, threw their whole savings into a speculative technology stock -- which promptly tanked. I agree that some growth stocks, like CAPS favorites Webzen (Nasdaq: WZEN ) and iGATE (Nasdaq: IGTE ) , look really compelling, but no growth stock is compelling enough to risk your whole retirement.
Buy a variable annuity. I'm not exactly a fan of traditional variable annuities -- big insurance companies like Hartford Financial (NYSE: HIG ) and Prudential (NYSE: PRU ) love to sell them, which should tell you something about the (huge) fees they charge -- and equity-indexed annuities are even worse. Some annuities out there are worth considering, but you should never buy any annuity without lots of research and a thorough understanding of the pros and cons -- and the fees.
Invest too conservatively. While you shouldn't be taking on crazy levels of investment risk, don't go sticking your nest egg under the mattress -- or in a money market fund -- either. No matter how old you are, you should have a portion of it in stocks -- whether it's a blue-chip name like General Electric (NYSE: GE ) or a good stock mutual fund.
So what should you do?
Invest what you have wisely. Follow the retirement road map: Choose good investments, keep an eye on them, rebalance every couple of years, and be sensible about asset allocation. If you're not sure where to start with asset allocation, the new issue of the Fool's Rule Your Retirement newsletter has excellent, ready-to-go model allocations for all stages of retirement savings. (You can see it all for free with a no-obligation 30-day trial; check it out.) And use the Fool's free educational resources if you need a little help learning to choose investments.
Work a little longer. Delaying retirement for three or four years -- ideally, until you're 70 -- can give you a significant boost: more time and money to build your nest egg, a better deal with Social Security, and -- although it's a little morbid to say this, it's important -- less time in retirement living off that nest egg.
Consider a reverse mortgage. A reverse mortgage is an annuity-like product that is backed by the equity in your home, rather than a lump-sum payment. It's insured by the Federal Housing Administration (FHA) and offered by leading banks like Bank of America (NYSE: BAC ) and Wells Fargo (NYSE: WFC ) . If you own your home, a reverse mortgage could be a worthwhile option for you -- but here again, delaying a few extra years can be hugely beneficial.
Consider a lifetime income annuity. While not as good as a well-chosen portfolio of stocks and bonds, a lifetime income annuity (or a portfolio of them) can be a reasonable choice if you really don't want to deal with the joys and stresses of investing when you're retired. Check out the Vanguard Lifetime Income Program and Fidelity's roster of annuity products for good-quality offerings, if you need a place to start.
Ask for help when you need it. A fee-based investment adviser can help you make sure you're getting the most bang for your investment bucks, now and while you're in retirement. Alternatively, you can get great objective advice for less money via my favorite retirement resource, the Fool's Rule Your Retirement. In addition to a great monthly newsletter, there are professionally staffed message boards where you can get answers to specific questions. Get full access right now for 30 days with no obligation.