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AARP The Magazine

Take Charge of Your Money at 70+

AARP financial ambassador Jean Chatzky has a plan for making your savings last

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The Plan for How You Invest

1. Find balance

Rebalance your assets at least once a year when you're in retirement, so that you have the appropriate amount in stocks, bonds and cash (as well as all of their subcategories) for your age and risk tolerance. Why? Because should the market take a major tumble, you have little time to make up what you've lost. If you are reading this and berating yourself for never rebalancing, it's time to punt. Put your money into a fund that will rebalance your account for you — a target date retirement fund.

2. Invent a pension

Converting 20 to 25 percent of your assets into an immediate annuity provides a fixed income stream for the rest of your life (and your spouse's, if you structure it that way), insuring yourself from the risk of outliving your money.

Your return is higher in your 70s than earlier, says financial planner Bill Losey, author of Retire in a Weekend, "because the older you are, the shorter your life expectancy, the higher your payout." Unless you purchase inflation coverage, it won't rise with inflation, and when you're gone, so's the principal. "Because today's low interest rates are currently not working in your favor, it makes sense to annuitize in chunks as you age," says Losey. "Then, you invest the remainder of your nest egg to provide the growth you need to keep up with inflation."

3. Look longer term

Got great genes and fear running out of money after age 85? You can hedge your bets with longevity insurance, a kind of deferred annuity that kicks in at an advanced age (typically 85). Then you'll start receiving monthly sums. Longevity policies are far cheaper than immediate annuities, and many retirement experts promote them as a defense against outliving your savings. But if you pass away early, the money's gone.

4. Work out the wills

If haven't already, talk to your kids or other heirs about your financial picture, says Maryland financial adviser Tim Maurer. "You have the opportunity to communicate your legacy, financial and personal, to your children. If you've had your head down, it's time to pick it up, while you have time." Every three years you should be going over your estate planning documents. A will, durable powers of attorney that allow others to make medical and financial decisions for you, and a living will should be in place.

Next page: The plan for how you spend. »

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MAKE YOUR MONEY LAST: AARP financial ambassador Jean Chatzky on planning for the future.

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