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Seven catch-up strategies
Yes, you should have started earlier. But there's hope.
October 11, 2004: 7:19 PM EDT

Get to know Oz
• Bye-bye Kansas
• Bye-bye pension; hello 401(k)
• Living longer; working longer

Plan your exit strategy
• Don't outlive your money
• Returns: Don't assume too much
• The ABCs of annuities
• Set up an annuity solution

Editor's note: The following is adapted from "We're not in Kansas anymore: Strategies for retiring rich in a totally changed world," by Walter Updegrave, senior editor at Money magazine.

The yellow brick road to retirement can have its share of potholes. We may not get an early jump on saving, or earn the returns we expected from our investments, or maybe the company stock in our 401(k) has taken a big hit.

If you've fallen behind in your retirement plan for whatever reason -- or never got started in the first place -- here are seven strategies that can help you build a decent nest egg or at least help your retirement savings last longer.

1. Rev up your savings.

The key here is make saving for retirement your number one financial priority and take full advantage of every tool out thereó401(k), IRA, etc. Obviously the amount of money you can accumulate will depend on how much you can stash away, how many years you have until retirement and the rate of return you earn on your investments. But even for someone starting at scratch from age 50, coming up with a six-figure nest egg by retirement isn't out of the question.

2. Delay retirement.

Postponing the time you'll begin dipping into your retirement assets allows your portfolio more time to growóand can give you the chance to make additional contributions to your savings plans as well. Clearly, the growth in your nest egg will depend on the rate of return you earn and the amount of new cash you put in. But delaying retirement just five more years has the potential to boost the value of your retirement portfolio by 45 percent or more.

3. Think "rehire" instead of retire.

According to AIG/SunAmerica's 2002 Re-Visioning Retirement survey, 95 percent of preretirees said they expect to work in some capacity during retirement. Holding a part-time job in retirement can help boost your retirement portfolio by helping you reduce the amount you withdraw from your portfolio. And you may even be able to use part-time earnings to add to your stash.

4. Scale back portfolio withdrawals.

Financially, this tactic has much the same effect as working during retirement. Cutting back on your withdrawals for several years leaves more money in your portfolio than you would have had without scaling back. These "extra" sums can earn a return and grow, thus giving you a larger portfolio to tap in the future. This tactic isn't painless; but, if downsizing your withdrawals by even a small amount, it can substantially increase what you'll have available later in retirement.

5. Get money from home.
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For most Americans, their home is their single largest asset -- and one retirees might consider tapping if other assets can't provide enough income. The two most likely options: selling and trading down to smaller digs (up to $500,000 in home-sale gains are tax-free for married couples, $250,00 for singles), and taking out a reverse mortgage, which pays retirees a monthly income while allowing them to remain in their home. To learn more about how reverse mortgages work, check out the Reverse Mortgage section of the AARP Web site.

6. Relocate to a less-expensive area.
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Admittedly, this is a bit radical, but moving to an area of the country with lower living costs can lower your living expenses by 15 percent to 20 percent in some cases and squeeze more out of your retirement savings and resources. For a sense of how much relocating might stretch your income, check out the Salary Calculator at, a site that compares living cost data from hundreds of U.S. cities.

7. Invest more aggressively.

Most people think of this option first. But it should be a last resort, because shooting for higher gains could backfire and leave you worse off than before. That said, increasing your holdings of stocks or stock mutual funds and even including more growth stocks and small-company shares in your portfolio can increase your portfolio's potential return and boost its value over the long run. Just proceed with caution.

More important than any single strategy, though, is being resourceful and thinking outside the box. If you approach your retirement finances with an intrepid spirit and a willingness to try new things, you'll be surprised at how many opportunities will pop up.  Top of page

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