Best Route to Retirement Security

En español  |  It's been no easy feat, watching your retirement nest egg wobble these past years. You've done what the financial gurus advised  — you started socking money away in your 401(k) eons ago with the expectation that it would sustain you comfortably in retirement. But with this last recession, your account just hasn't bounced back like you'd hoped.

Exhibit A: In 2007, the average household in this country had a 401(k) balance of around $78,000. Following the dizzying stock market drop of 2008, retirement savers are still climbing their way back with average balances so far at only about $63,000.

What's more, the whole financial logic of the 401(k) has come into question.

You were always told that after you retired, you would drop to a lower tax bracket. So shelter your money now in a 401(k) and pay the IRS less when the money comes out. But the nation's deficit crisis has many experts wondering whether taxes will go up in the years ahead. If that happens, your promised tax savings could vanish. You might even pay more than you would now.

So what can you really rely on?

In part, your 401(k), experts say. Don't abandon it. But even Ted Benna, who is widely acknowledged as having invented the first 401(k) in 1981, has said that the new kind of account was never meant to be the sole vehicle for retirement saving.

The best route, many financial advisers now say, is to feed your 401(k) with whatever amount it takes to get your employer's full match. Then, with any extra money you can scrape together, consider these alternative moves:

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• Explore an IRA. With an individual retirement account, the 50-plus can stash away an additional $6,000 annually. There's a distinct advantage here over your 401(k): You have your pick of the full universe of investments, not just the limited selection offered by your employer's plan.

With a traditional IRA, you make contributions tax-free. When you withdraw, generally after age 59 1/2, the money is taxed as income.

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Boomers "will have to make sacrifices in order to ensure the retirement they envisioned."

With a Roth IRA, you're taxed on the front end, but you get to run off with your earnings tax-free when you withdraw. And you don't have to lose sleep wondering whether your future tax bracket will be higher than today's.

If you go the IRA route, it's wise to educate yourself about investment options or seek the advice of a financial planner who can help you build your portfolio.

• Think bonds. Not the James variety, but almost as dependable. Consider them good friends who will stick by you during a stock market storm. Bonds "are safe fixed-income securities, which have low risk," says Chris McLean, a principal at the wealth management firm Signature in Charlottesville, Va. When you purchase a bond, you're essentially lending money to a borrower that promises to pay interest over the life of the bond and repay the face value when it matures. You can get individual bonds through brokers or buy into bond funds.

If you've got the cash and want to go to town with the idea, talk with a pro about a "laddering" strategy  — purchasing multiple bonds with staggered maturity dates, which will help smooth out any ups and downs in the market.

• Get insured. Some people have set a goal that no matter what happens, they want something to be left over to will to a loved one. If that's your thinking, consider using a portion of your assets to purchase a permanent insurance policy, advises Paul Markowich, senior financial professional at Firstrust Financial Resources in Philadelphia.

Married couples should look into survivorship insurance — the premiums will be lower because the death benefit will only be paid after the second spouse passes away. "The advantage with this strategy," says Markowich, "is you will have the peace of mind and ability to spend more of your assets during your lifetime, knowing that upon your passing a financial legacy will be left."

• Don't fall for the old okey doke. It's tempting to jump on any range of get-rich-quick schemes out there. If someone suggests you take a lump sum for your retirement and start flipping houses or become an angel investor in a new start-up company, think twice. No, thrice. It's a little late in the game for big gambles. Keep your eyes on the prize and simply make smart choices to save, not spend. Speaking of saving …

• Spend less, save more now. Basic principle, right? Living comfortably in retirement may mean cutting back on expenses. Set a budget and live within your means so you can try some of the above saving alternatives.

Boomers "will have to make sacrifices in order to ensure the retirement they envisioned," says Lynn Mayabb, senior managing adviser at BKD Wealth Advisors, Kansas City, Mo.

"The only things people can control are how much they save, how much they spend."

Also of interest: 5 easy ways to boost your bank account. »