(MONEY Magazine) – "The best-laid schemes o' mice an' men gang aft agley," wrote Scottish poet Robbie Burns in 1785. He wasn't discussing retirement, but well he mae ha' ben, since plenty can gang agley. No matter how much we strategize in advance, one big mistake can turn our post-65 dream into a time of anxiety or even deprivation. As Burns might say, we can screw op big tyme. For example, many retirees, such as Gerald Kirschenberg, 78, and his wife Lillian, 72 (pictured on page 92), are so eager to wring more income out of their retirement stash that they invest in risky schemes that can wind up saddling them with steep losses.

In this story, we profile three retired individuals and one couple who have made this kind of major retirement-planning mistake. With the help of a dozen leading financial advisers and other experts, we offer advice to help these retirees recover from their gaffes. We also suggest strategies you should take to avoid making similar missteps en route to your own retirement.

1. FAILING TO SAVE ENOUGH DURING YOUR CAREER

In 1988, at age 64, Arthur Anders of Sand Springs, Okla. was looking toward a lean retirement. For 25 years, he had worked for two amusement companies, installing and maintaining jukeboxes and vending machines. Neither company had offered a pension. Then, in 1988, Anders' third employer, automotive supplies conglomerate Stewart Warner, shut down the Oklahoma operation where he had worked for the preceding 14 years. When he left, all he got was the $30,000 of his own money that he had accumulated by contributing 3% of his salary to the company's employee retirement savings plan. A widower whose wife died of cancer in 1984, Anders was panicked about having to survive on little more than about $11,000 a year in Social Security payments. "I didn't have enough money, and I knew I had to do something," he says.

His first tack: Find another job. Almost immediately, Anders landed a spot in sales paying $12,740 a year at the Pump Shop, a Tulsa automotive supply warehouse where he worked until last November. Alas, he received no pension benefits from this firm either.

The next step was to grow his modest nest egg. In 1990, Anders invested 40% of his $30,000 in dividend-paying stocks such as $24.3 billion (estimated '97 sales) Johnson & Johnson (recent yield 1.3%) and $2.4 billion Allegheny Power (6.6%) to generate income. For capital appreciation, he put another 20% of his money into growth issues like $10.8 billion software giant Microsoft and $28 billion computer-chip maker Intel. He plowed about 25% of his money into two index funds that invest in shares of large U.S. companies--the $2.1 billion Schwab 1000 and the $34.6 billion Vanguard Index 500. He kept the remaining 15% in precious-metals stocks and a bank account.

Riding the bull market for the past seven years, Anders parlayed his savings into $210,000--a fabulous 32.1% return, or more than double the 15.3% gain for stocks overall during the same period. Believing the market was beginning to look shaky, Anders retreated to a more defensive position at the end of March, moving about $30,000 from growth stocks into shares of more stable utilities and energy companies like $14.6 billion Enron. His nest egg now throws off about $1,500 a month in income, which supplements the $900 he gets from Social Security. He owns his $120,000 house free and clear but still says that his income "is just barely enough to live on."

--What he should do: Centereach, N.Y. financial planner Ron Roge applauds Anders for the impressive returns he's earned. But he feels Anders is too dependent on the domestic stock market, which MONEY's Wall Street editor Michael Sivy believes could fall 15% or so from recent levels by the end of the year. Roge says that by putting 15% to 20% of his portfolio into no-load international stock funds, such as $1.5 billion Tweedy Browne Global Value (12-month return to April 1: 16.7%; 800-432-4789) and $398 million Artisan International (28.6%; 800-344-1770), Anders can improve his portfolio's long-term return while lowering risk. To squeeze out a bit more income, Roge advises Anders to put 5% of his funds into a so-called flexible bond fund such as $622 million Janus Flexible Income (7.5% recent yield; 800-525-8983), which invests in corporate and government bonds as well as dividend-paying stocks.

--How you can avoid this mistake: Sock away as much as you can in employer-sponsored savings plans, such as 401(k)s, which let you invest pretax dollars that compound tax-free until you withdraw them at retirement. Some 90% of large and medium-size companies offer such plans; most will also kick in half of what you contribute, for a typical maximum match of 3% of your salary. If your employer doesn't offer such a plan--or you have extra cash you can set aside--invest the maximum allowable $2,000 into an Individual Retirement Account. Even if you can't deduct your contribution from your taxable income--the deduction begins phasing out at $40,000 of taxable income for married couples and $25,000 for singles--the gains you earn remain untaxed until you withdraw them. If you've funded your IRA and you have even more money you can afford to put away for at least 15 years, consider low- or no-load, tax-deferred variable annuities such as those offered by T. Rowe Price (800-469-5304), USAA Life (800-531-8000) and Vanguard (800-851-4999). These investments are essentially mutual funds with a tax-shelter wrapping.

2. FALLING FOR A TOO-GOOD-TO-BE-TRUE INVESTMENT

Through careful saving, Gerald Kirschenberg and his wife Lillian were able to retire to Sunrise, Fla. in 1978 with a substantial retirement portfolio. "We were dancing in our swimming pool, saying 'We made it,'" recalls Lillian, a former Queens, N.Y. bookkeeper. Leery of speculating in the stock market, she and Gerald, a former owner of a men's clothing store, had safeguarded their funds in federally insured bank CDs that then paid about 8%, which provided enough income for the couple to retire comfortably.

By 1989, however, those CD rates had plunged to just 4%, and the Kirschenbergs panicked. What if they didn't have enough money to last the rest of their lives? When an Advest stockbroker they had never met came cold-calling and offered a supposedly safe investment with a tax-advantaged return starting at 10.5% and rising to 12% in the sixth year, they went for it. At the broker's urging, the Kirschenbergs contend, they cashed in some of their low-paying CDs and in 1989 invested $28,500 in two equipment-leasing limited partnerships.

The Kirschenbergs have received a 12% payout from one of the partnerships for the past seven years. But they say the payments on the other--called the PLM Equipment Growth Fund IV--declined from 10.5% in 1991 to as low as 2.5% in 1994. Worse, the couple didn't realize that part of the income they got from both partnerships was actually a return of their own principal, which is why they didn't owe tax on it. That alleged deception, plus Advest's supposed assertions that the partnerships were safe, are two reasons why the Kirschenbergs and dozens of other elderly investors have filed an arbitration complaint for fraud against Advest for the PLM partnership. The investors' lawyer, Patricia A. Shub, also charges that the PLM partnerships took fees and expenses of almost 20% off the top before investing any money. When investors asked why they weren't receiving the promised income, Shub says, Advest blamed a bad business climate.

Advest assistant general counsel William Freitag told MONEY that the firm's brokers provided prospectuses that outlined the terms of the partnerships. But now that investors are disappointed with the results of the investment, he says, they want to hold Advest responsible. "We feel that is inappropriate, and we are fighting the complaint," says Freitag.

The Kirschenbergs are resigned to the likelihood that it could take years before their case is resolved. In the meantime, their attorney estimates that the partnerships are now worth only about 20% of their original price. "Fortunately, we haven't had to modify our standard of living, though we did want to leave that money to our kids," says Lillian. Their experience has convinced them never to move out of bank certificates again, particularly now that rates for five-year CDs have risen into the 6% to 7% range.

--What they should do: Randall Hedlund, an Overland Park, Kans. financial planner, sympathizes with the Kirschenbergs but says that their all-CD strategy is shortsighted. "Both Lillian and Gerald could live another 20 years," he says. "And the income they get from CDs won't keep up with inflation." As an inflation hedge, Hedlund suggests the couple gradually move 15% to 30% of their savings into conservative no-load equity funds such as Vanguard's Wellesley Fund (12-month return: 10.1%; 800-851-4999) and Dodge & Cox Balanced (12.6%; 800-621-3979), which invest in a blend of large-company stocks and high-grade bonds. These funds probably won't get hammered in market squalls, and they can deliver solid capital growth over the long term.

--How you can avoid this mistake: Maintain a portfolio that divides your money among stocks, bonds and cash, so you won't have to resort to esoteric investments promising plump payoffs in 16 minutes. The precise mix you settle on will vary depending on your age and stomach for risk, but even elderly investors ought to keep at least half of their money in equities. And just say no to any pitch for an investment that is supposed to be safe and generate a double-digit return. That goes double when you hear one peddled over the phone by someone you don't know.

3. LEAVING FINANCIAL DECISIONS TO YOUR SPOUSE

Eoline Patton, 79, who likes to be called Pat, never gave much thought to herself, much less her retirement. She left the finances to Jack. Pat started working in 1960 as a volunteer at a nonprofit children's nature museum in Charlotte, N.C., eventually taking a full-time job there in 1965. In 1979, her husband Jack quit his job as a chemist with Pennwalt Chemicals because of worsening emphysema. The next year, Pat took a job at Discovery Place, a science museum in Charlotte, and eventually became an administrative assistant, earning $18,000 a year.

For a while, the couple were able to manage on her salary, plus the $920 they received monthly from Jack's Social Security payments and his $500-a-month company pension. By 1987, however, Jack's breathing became so bad that he didn't have the strength to drive, and he fell into a depression. Selflessly, Pat quit her job to spend time with him. "I wanted to make his last years happy ones," she says.

After Jack died in 1990, though, Pat stopped getting his pension because her husband had not signed up for the joint-and-survivor option that would have paid lifetime benefits for both spouses. So at age 71, Pat realized that she would receive only the $984 a month from her own Social Security earnings. She wasn't sure she could live on that. "Women should pay more attention to their finances than I did," she says.

Pat jumped at a friend's offer of a temporary spot in the office at Garden Secrets, a local plant store. The assignment soon turned permanent, and now Patton can count on a salary of about $22,000 a year. The job turned out to be a blessing in another way: It keeps her occupied. "So many of my friends are unhappy in retirement. They have nothing to do all day," she says.

--What she should do: Patton needs another source of money in case illness or advancing age prevents her from working. The $75,000 equity in her condominium is her only significant asset. By taking out a reverse mortgage, says Ken Scholen, author of Your New Retirement Nestegg (NCHEC, $24.95; 800-247-6553), she could draw against her home equity with a $30,000 to $40,000 credit line or receive monthly payments of $300 to $450 from a lender. When she dies and the house is sold, the lender will get first dibs on the proceeds.

--How you can avoid this mistake: You and your spouse should meet with your financial planner or accountant for a so-called needs analysis, which forecasts your likely future expenses year by year and shows whether they will exceed your projected income from sources such as work, your pensions and investments. If the expected outflow exceeds resources, boost your savings to bridge the gap. If it appears you may still have a shortfall, consider adding to your life insurance.

Also, it's generally smart to have your spouse choose the joint-and-survivor option for pension benefits, which guarantees that the checks will keep coming after his or her death. Since women live about seven years longer than men, on average, this move can be especially crucial for them.

4. CHOOSING THE WRONG PLACE TO LIVE

Four years ago, Juanita Rippetoe, now 69, and her husband Bill, then an owner of a car-leasing business, retired to a dream house they had built in the suburbs of Fort Worth. Four months after they moved in, Bill died of a massive heart attack. After that, Nita says, "I hated the house. It brought me nothing but sadness."

Her sister-in-law and other relatives urged Nita to move to Houston to be near them, so she agreed. Her family directed the search for a new place, picking out a $147,000 three-bedroom house in a new gated community in Katy, about 10 miles outside of Houston. "It's an elegant house," Rippetoe says, but it was "a big mistake." Only a few others have sold, so Rippetoe doesn't have many neighbors, and most of them are young families who don't share her interests. She doesn't see her relatives much either, because they work full time. She feels marooned. "Every time I go to an aerobics class or play bridge, I have to drive about 30 miles," Nita says. She would like to move to Houston or even back to Fort Worth, where she has friends. But with new homes moving at a glacial pace in her subdivision, she would probably have to take a 15% loss to unload her house.

Rippetoe has not let the housing error sink her retirement, however. She fights off isolation by involving herself in a whirl of activities in Houston--bridge, exercise, volunteer and church work. Still lonely, particularly in the evenings, Nita feels that a gentleman friend might be the best solution to her problem. "A lot of men my age seem to want a nurse or a purse," she says with a laugh. "But I'm looking."

--What she should do: Jane Halloran, a Houston gerontologist who heads up a Merrill Lynch program that offers seniors and their adult children assistance with retirement issues, cautions that retreating to Fort Worth may not ease Rippetoe's melancholy. She has been away for most of the past four years, so she may no longer have that much in common with her friends there. Instead, Halloran suggests that Rippetoe might sell her home when the housing market revives, invest the proceeds and then consider moving to an apartment in the thriving section of downtown Houston known as The Galleria.

--How you can avoid this mistake: Before relocating to a retirement paradise, says Halloran, "rent an apartment or a house in the area to see if you like living there." Widows should be particularly cautious about uprooting soon after a husband's death. In their grief, they often rely on a child or another relative to make difficult decisions like selling the house or moving to a new city. Then they wind up in places that don't suit them--for instance, a community that has a shortage of eligible men of a certain age.