By Andrew Leckey

"Retire rich." Those words entice us from magazine covers in the supermarket line, infomercials on late-night TV, pop-up ads online and flyers distributed by investment firms.

Often accompanied by photos of happy folks on lawn chairs, yachts or golf courses, they spur our imaginations even in uncertain economic times.

"A McMansion, an expensive car and lots of clothes and jewelry represent what most Americans consider to be a rich lifestyle," said Bonnie Hughes, certified financial planner and principal at American Capital Planning LLC, Reston, Va. "I consider dressing well to be the cheapest aspect of all that, since you can buy fabulous brands at consignment shops."

While no one can be guaranteed riches, an investor truly serious about having a comfortable retirement should put aside 17 percent of annual gross income starting at an early age, plus another 2 percent on top of that for health care costs, Hughes advised. Invest 60 percent in stocks and 40 percent in bonds and cash to start, stick with your plan as you make minor adjustments and you should reach your goal.

"Trust me, it's a lot easier to live with a little poverty at age 50 than it will be at 70 or 80," she said. "Maybe you'll take less expensive vacations and have champagne a lot less often, but living below your means is the key to successful retirement savings."

Lacking a realistic sense of what comprises retirement comfort and how to get there, average investors often swing for the fences with their money.

"In the 1990s, the perception was that the S&P 500 was the ticket to retiring rich and young, but that went out the window in 2000," recalls Michael Boone, CFP and president of M.W. Boone & Associates, Bellevue, Wash. "In the early 2000s, real estate offered the get-rich-quick strategy of owning a few houses, then living in one and getting rental income from the others, but that hasn't worked out either."

Those who did enjoy enormous financial gain likely bought and sold early in a cycle or shouldered a foolhardy risk that paid off against the odds. They benefitted more from luck than a winning formula worth copying.

Long-term investment success is more dependent on investor behavior than how underlying investments perform, the DALBAR research firm has found. Its quantitative studies indicate that investors switching in and out of mutual funds receive much lower returns than if they had simply stayed the course. Jumping out of stocks and funds in 2008 represented a typical error in judgment.

"Investors must have confidence in their plan and understand how different investments in it are working toward their retirement goals," said John Sweeney, executive vice president of planning and advisory services for Fidelity Investments, Boston. "Panic is the biggest mistake because they forget why they chose a certain asset allocation in the first place."

There is always the possibility your company's stock will split many times over, your assets will rise dramatically in value, your new business will hit the jackpot, or your pet idea will spawn a blockbuster product. But you can't count on it.

So here's what the experts recommend to assure a comfortable retirement, and maybe even a rich one:

First total all your assets and liabilities, then run an analysis with reasonable assumptions that take into account risk tolerance, taxes and time horizon. This mathematical process runs thousands of iterations of computer simulations to see what all the possible outcomes are. You should know what they are.

Consistently live on less than you make and invest the rest. Investors who utilize the asset allocation approach of domestic and international stocks, small and big-cap stocks and different sectors can do well in good times and protect themselves in down times. Boone says he has never had a client who invested this way ever declare bankruptcy.

Realize that there is no magic number to retirement well being, but have a goal as you follow your plan. Monitor what everything costs. Your money must last as long as you do, which is likely be long after your retirement date.

Don't assume your appetite for spending will shrink once you retire, since the opposite is more probable. Going from three annual weeks of vacation to 52 weeks increases your opportunity and inclination to spend money on many new things. Take this into account before you retire and keep it in mind after you do retire.

"Save up to the maximum on your company 401(k) plan and, when you've maxed that out, look to an individual retirement account," said Sweeney, who also recommends paying off high-interest credit card debt. "Start investing with an asset allocation that gets more conservative as you approach retirement, then five years from retirement create a retirement income plan."

Nearly half of American workers say they are either "not too confident" or "not at all confident" that they will have enough money for a comfortable retirement, according to the latest retirement confidence survey of the Employee Benefit Research Institute.

Sadly, about one-third of the survey respondents said they have not saved for retirement. If you harbor ambitions for a comfortable retirement, let alone a rich one, don't be in that latter group.

Available at Amazon.com:

Lifecycle Investing: A New, Safe, and Audacious Way to Improve the Performance of Your Retirement Portfolio

Worry-Free Investing: A Safe Approach to Achieving Your Lifetime Financial Goals

Spend 'Til the End: The Revolutionary Guide to Raising Your Living Standard--Today and When You Retire

The Hard Times Guide to Retirement Security: Practical Strategies for Money, Work, and Living

 

Personal Finance - Plan Ahead For a Comfortable & Potentially Rich Retirement

© Andrew Leckey