Many people retire hoping that whatever they have saved will be enough. Others find themselves suddenly retired before they planned to be -- because of a health issue or a layoff. It's best to start preparing for retirement long before it happens. Here are some critical considerations that can increase your future financial security.

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You need a plan

It's very important to have a retirement plan -- know how much you need to accumulate for retirement and how you'll achieve that. Don't despair that you can't amass a useful sum, because you probably can. The following table may inspire you:

Growing at 8% For:

$5,000 Invested Annually

$10,000 Invested Annually

$15,000 Invested Annually

15 years




20 years




25 years



$1.2 million

30 years


$1.2 million

$1.8 million

Calculations by author.

You plan may include contributing as much as possible to a traditional or Roth IRA (the contribution limit for 2017 is the same as for 2016 -- $5,500 for most people and $6,500 for those 50 or older) and at least enough to your workplace 401(k) to collect all available matching funds. You may also have a separate, non-tax-advantaged retirement account, perhaps with much of your long-term dollars parked in an inexpensive broad-market index fund such as the Vanguard S&P 500 Index fund (NASDAQMUTFUND:VFINX) or the SPDR S&P 500 ETF (NYSEMKT:SPY).

Don't forget the power of dividends, too: According to Ned Davis Research, for example, dividend-paying stocks averaged an annual gain of 9.3% from 1972 through 2014, while non-dividend payers averaged just 2.6%.

Approach the 4% rule with caution

To figure out much you can take out of your stock-and-bond nest egg each year in retirement to make it last, you may want to use the "4% rule." It has you withdrawing 4% in the first year and then adjusting that sum for inflation in following years. The rule is designed to have your money last about 30 years.

Here's how you might use it: Imagine that you're aiming for annual income of $50,000 in retirement, and you expect $25,000 to come from Social Security benefits. That leaves you needing to generate $25,000 on your own. How big a nest egg will generate that income? Well, inverse the 4% and you'll get 25 (100 divided by 4% is 25). Multiply $25,000 by 25 and you'll arrive at $625,000, the nest egg you'll need if you want to apply the 4% rule. You might be more conservative and withdraw 3.5% instead of 4%. If so,multiply the $25,000 by 28.6, and you'll arrive at a goal of $715,000.

The 4% rule is imperfect in many ways, but it can still give you a general idea of how much you might take out.

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Health expenses can be substantial in retirement

According to Fidelity Investments, a 65-year-old couple retiring this year will spend, on average, about $260,000 out of pocket on healthcare in retirement. And that's just the average -- many will spend much more, while others spend less. You can increase your odds of spending less by getting and staying as healthy as possible, exercising, and eating nutritious foods. Staying social in retirement will also help, keeping you mentally and physically healthier and possibly keeping dementia at bay. Be sure to get any routine screenings you're due for as well. Even if you're in the pink of health, be sure to keep healthcare costs in mind as you plan for retirement.

Consider buying yourself some annuity income

You can take some pressure off yourself, financially, by buying one or more annuities. They can deliver dependable income without your having to keep track of any investments. Focus on fixed annuities, not variable or indexed ones, as variable or indexed ones can be more problematic, with high fees and restrictive terms. A fixed annuity offers a fixed income (possibly increasing with inflation, if you pay for that feature) that can start arriving immediately or in the future. As an example, with a $200,000 investment, a 70-year-old couple might be able to collect close to $1,000 per month in fixed annuity income for as long as at least one of them is alive. Deferred annuities are worth considering, too, as they can help you avoid running out of money late in retirement. A 65-year-old man could spend $100,000 today for a deferred annuity that pays him about $1,250 per month beginning at age 75.

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There are ways to get more income in retirement

Before or after you retire, if you think you'll need more income in retirement, be assured that one way or another, you can probably achieve that. One way to do so before you retire is to pay off your mortgage early. If you enter retirement without having to make those $1,500 monthly payments, you'll have more room to breathe, financially speaking. (Paying off a mortgage early will also save you interest payments.) You might also consider getting a reverse mortgage, where you essentially borrow money based on your home equity and don't have to pay it back until you die or stop living in your home. It can deliver a welcome (tax-free!) income stream, but it can also mean your heirs don't get to inherit your home. Another option is signing up for a Medicare Advantage plan in retirement -- some feature very low premiums and all will cap your out-of-pocket spending.

A particularly powerful way to boost your retirement income is to work a few more years than you planned, if you can. Doing so lets you save more, lets your nest egg grow more, reduces the number of years that your nest egg will have to support you, lets you stay on your employer's healthcare plan longer, and can also help you delay starting to collect Social Security. (The later you start collecting, up to age 70, the bigger your checks will be.)

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Social Security may not be as powerful as you think

If you're thinking that you can rely largely on Social Security in retirement, think again. Many people do rely largely on Social Security, but it's not a comfortable option. According to the Social Security Administration, retirement benefits for those with average earnings will likely replace about 40% of pre-retirement earnings. Those who had above-average earnings in their working years can expect a lower replacement rate, and vice versa. This makes it especially valuable to learn more about Social Security strategies such as when the best age would be for you to start collecting benefits.

Approach retirement in an informed fashion, with a plan. By taking actions such as saving aggressively, investing effectively, factoring in health expenses, and making the most of Social Security, you can reach your financial goals and enjoy a secure future.