On the news tonight they announced that another 11,000 baby boomers (born between 1946 & 1964) turned 65 today. 6 out of 10 say that their investments, retirement plans & homes have lost value in the last 3 years with 42% delaying their retirement date. So I thought that this article from AARP might be helpful.

One bad decision can ruin a lifetime of good ones

by: Joseph Hearn | from: AARP Bulletin | 2011

One of the earliest lessons in life is that actions have consequences, and boy is this true in the final third of life. If you’re at or near retirement, the decisions you’re about to make will have consequences for decades to come. Unfortunately, it only takes one bad decision to ruin a lifetime of good ones. So what are the biggest mistakes to avoid?

1. Retiring based on your birthday instead of your bank account.

Imagine that I wrote the name of a city on a piece of paper and sealed it inside an envelope. Giving you the envelope, I said: “Without looking inside, drive to the airport and buy a plane ticket to anywhere in the world. When you arrive, open the envelope and see if the place matches with the destination that I wrote on the paper.” What are the odds that you would end up in the right city? Not good, right?

 — Paul Bradforth/Alamy

Retirement is about independence, not simply age, and money is critical to independence.

As ridiculous as it sounds, that is how most people plan for their retirement. People save; they just don’t do it with a great deal of deliberation or a clear understanding of the end goal. They do it with a completely random series of 401(k) and IRA contributions. And they may end up far from where they need to be.

If asked when you’ll retire, your answer should be a dollar amount, not a year. Retirement is about independence, not simply age, and money is critical to independence. You need to know exactly how much you need to save to fund the retirement you want.

2. Not properly managing your risk.

Risk is a necessary companion to investing. When you’re in your 20s and 30s, you can afford to take greater risks in hopes of receiving greater returns. If you lose money, you have decades to recover. Not so as you approach retirement. You can’t afford to operate at the same risk level. As you age, you need to progressively shift out of potentially volatile investments. During retirement, large losses in your portfolio are extinction-level events. They are like meteors to dinosaurs.

Consider the mathematics of loss. Imagine you had a $1 million portfolio that lost 50 percent in a given year, dropping to $500,000. If it gains 50 percent the next year, you’re not back to even, you’re only at $750,000. To get back to even you would need a 100 percent increase. So, the bigger the loss, the more difficult the recovery.

If markets have taught us anything during the last 10 years, it’s that you need a plan to manage your risks and avoid large losses.

The same is true for a whole host of new risks that come with growing older. A serious medical condition, the death of a spouse, getting laid off, entering a long-term care facility or getting divorced could all significantly impact your emotional and financial well-being. The goal is to consistently identify and manage your risks in order to increase your odds of a rewarding retirement.

3. Retiring with too much debt.

When the history of the 2008-2009 market collapse is written, I have no doubt that debt will be the central theme. Sadly, many of the 78 million boomers approaching retirement got caught up in the frenzy along with everyone else. Now, as they approach a time that is supposed to be about enjoying life and living their dreams, they instead find themselves beholden to their jobs and struggling to make ends meet.

An increasing number of people are entering retirement age with no pension, inadequate savings, a big mortgage (sometimes two), an average of about six credit cards, and debt on one or more cars. Work is not a choice at that point any more than it’s a choice for a 30-year-old with all the same obligations and a growing family to feed.

Having debt adds risk and reduces cash flow. Your primary goal should be to retire debt-free and have your income at your disposal. If you retire with debt, you will spend a long period paying for the purchases of yesteryear instead of using your income to live the life you’ve dreamed of.

4. Not getting professional advice.

Preparing for retirement is all about accumulation — saving and investment performance are your primary concerns. But in retirement, your primary goal becomes much more complex: to continue to grow the pie while simultaneously eating it. Going without a competent adviser at this stage could be a big mistake.

5. Fumbling your distribution strategy. Improperly converting your savings into an income stream, taking too much too soon from the wrong account or in the wrong markets could be the difference between retirement bliss and retirement blunder.

A distribution strategy typically occurs in two phases. Phase 1 involves moving the money from preretirement accounts, for example, your 401(k), to postretirement accounts. Phase 2 involves creating an income stream from those postretirement accounts.

The ideal time to begin working through your distribution strategy is a year or so before retirement. You should be thinking about how much you need, where it’s going to come from, and whether your nest egg is up to the task.

When you retire, your portfolio takes over the job that the payroll department handled during your working years, namely to send you a paycheck every month. If you retire when you’re 65 and live until you’re 85, it needs to cut you 240 monthly checks. There are a host of variables that will affect its ability to do that, such as the distribution rate you choose, investment returns, inflation, how long you live — and good old-fashioned luck.

Some things you can control and others you can’t, but having a well-conceived, sustainable distribution strategy will help ensure that your money lasts as long as you do.

Joseph Hearn is the author of The Bell Lap: The 8 Biggest Mistakes to Avoid as You Approach Retirement.