Retirement: Getting Ready

Don't retire too early. "Working longer will become a necessity for many people," says Andrew Eschtruth, a spokesman at Boston College's Center for Retirement Research. "If you can work into your mid to late 60s, it will make a huge difference." For one thing, your savings and 401(k) can grow without your drawing on them for everyday expenses. That extra time can improve your chances of maintaining a comfortable retirement lifestyle.

Waiting also gives your Social Security benefits time to build up. To see how much you can expect to receive from Social Security, go to socialsecurity.gov. Remember, if you start collecting government checks at age 62, when you become eligible, your monthly payments will be smaller for the rest of your life. For each year that you work beyond your full-benefit retirement age (that's 66 or 67, depending on your year of birth) up until age 70, your Social Security benefit rises 8 percent.

Know how much money you'll really need. Some retirees, like teacher Pat Forest, 65, are having the time of their lives. Forest made sacrifices throughout her career to stretch her income and is now spending time with her grandkids between trips to dream spots like Egypt and Italy. But in an environment where nearly $2 trillion in 401(k) and IRA assets evaporated in the 12 months after October 2007, how do you know when you're ready to start the retirement chapter of your life?

One traditional rule of thumb: Expect to spend about 70 percent or 80 percent of your final working salary each year you're retired. But planners like Mackey McNeill say that's an oversimplification; after all, people tend to underestimate their expenses and overestimate how well their investments will perform. Instead of working toward an abstract number, she suggests, make yet another budget for yourself to uncover how much you'll really spend. Consult a fee-only planner -- napfa.org has a list -- or work with calculators like the one at choosetosave.org for a guide.

Think carefully about health care. This is especially true if you're planning to retire before you're eligible for Medicare, at age 65. Even then, Medicare won't pay for everything, so look into the Medicare Advantage program or private Medigap insurance, which covers the difference (a typical policy costs $100 to $300 a month).

Stay conservative. Keep cash you absolutely can't afford to lose in government-insured bank accounts, even though their rates aren't very high right now. Bank deposits are insured for up to $250,000 this year, but the rules may change in 2010, so check with the FDIC (fdic.gov) for the latest updates.