Unless you want to work until the day you die, you face a scary decision in trying to figure out when and how you'll retire. For many people, once you walk off your job site for the last time, getting a high-paying job again is no longer an option. So before you pull the cord on your paycheck prospects, it pays to make contingency plans for everything that could happen during the rest of your life.

How do you do that? You can boil it down to four steps to retirement success:

Most folks do their best getting a job that'll pay them as much as they can earn. Where we've fallen down, though, is in putting money aside toward our future needs.

Danger: pay cut ahead
The latest confirmation of this comes from a study by Ernst & Young and Americans for Secure Retirement. It makes a couple of troubling conclusions:

  • Those who are retiring now will have to cut expenses by almost a quarter to keep from using up all their retirement savings prematurely.
  • For slightly younger workers with seven years to go before retiring, the news is even grimmer: It will take a 37% spending cut to make their retirement nest eggs last their lifetimes.

Given that the research on this study took place before the latest market swoon, the numbers may well be even worse by now.

You might think that cutting expenses after you retire would be pretty easy. But while you may not have to fill up every week at $100 a tank to get to work, there are plenty of costs that can only go up as you get older -- ranging from absolute necessities like medical care to the recreational pursuits you've waited so long to enjoy.

As a result, once you've controlled your expenses as much as you can, being a smart investor is more important than ever. Even after you retire, not paying enough attention to your investments can spell disaster.

Investing for retirement
One big problem facing both current and future retirees alike is that the bear market has turned traditional investing rules on their head. For example, those near or in retirement have historically turned to stocks with high dividend yields, both to supplement their other income and to avoid some of the volatility from the overall stock market.

Recently, though, even dividend stocks have been taking it on the chin. Here are some of the most popular:


Current Dividend Yield

1-Year Return

5-Year Annualized Return

Bank of America (NYSE:BAC)




General Motors (NYSE:GM)




Merck (NYSE:MRK)








Consolidated Edison (NYSE:ED)




General Electric (NYSE:GE)








Source: Yahoo Finance.
*Spun off from Viacom in January 2006.

If you consider dividend payers to be among the safest stocks, then you can understand how frustrating these stocks have been. Their poor performance, especially recently, has tempted many retirees to get out of the stock market at all costs, no matter what losses they've already suffered.

But getting out of stocks entirely is ultimately a retirement killer. For one thing, the timing is terrible -- you've already suffered bear-market losses. More importantly, for money that may need to last you another 30 or 40 years, it's unlikely that you'll find an alternative to stocks that will give you a higher return over time.

Investing so that you can retire comfortably will always present a challenge, because it requires postponing current enjoyment for an uncertain future. The rewards, however, make it well worth the effort -- and by following a few simple steps, you'll vastly improve your own retirement prospects.

To learn more about retiring rich, read about: