How to Fight Back in the War on Retirement

If you want to retire rich in today's tough investing environment, you need to use every advantage you can get. Unfortunately, many workers are finding it increasingly difficult to hang onto the advantages they once had.

While pining for the good old days doesn't do anyone any good, it's instructive to look back at some disappearing resources that retirement savers used to have working for them. Even though their absence may make saving for retirement harder, you can still overcome the additional challenges this raises if you work hard and follow a smart financial strategy.

Losing your crutches
In the past, workers had a more extensive support mechanism to provide for their post-career years. With Social Security and Medicare, as well as employer pensions and other retiree benefits, whatever savings retirees were able to put aside was just gravy. Moreover, what money you did save often provided huge returns that greatly enhanced your retirement lifestyle.

Now, though, those assets are under assault. Consider:

  • Traditional pension plans are disappearing quickly, with employers increasingly freezing existing plans and closing their doors to new employees. Bank of America (NYS: BAC) and General Motors (NYS: GM) are just two of the many companies that have announced plans so far this year to implement pension freezes. Over the years, other benefits have also gone away, with 3M (NYS: MMM) among the companies dropping retiree health insurance coverage back in 2010.

  • The latest trustees reports from Social Security and Medicare show that the trust funds for paying benefits will run out of money in 2033 and 2024, respectively. The resulting cuts in payouts could be devastating for many retirees.

  • For years, workers counted on a 10% return on stocks. But the lost decade showed that relying on big returns that don't materialize can throw your retirement planning into turmoil.

Moreover, even some of the contingency plans that people have been making may not be viable. For instance, more people than ever now expect to work past retirement age, either by hanging onto their existing jobs longer or by getting part-time work in retirement. But with jobs already hard to come by and corporate layoffs still common, you can't afford to count on being able to stay in your job as long as you want -- even if you stay healthy enough to work into your late 60s and early 70s.

The benefits of doing it yourself
All these uncertainties increase the value of having money of your own set aside for your retirement. The longer you can go without relying on outside sources of income, the more autonomy you have to define your own standard of living in retirement.

For instance, one option you have with your retirement savings is to buy an annuity. Essentially a do-it-yourself pension, annuities turn a lump sum of money into a stream of monthly income. And while guarantees provided by certain Hartford Financial (NYS: HIG) and Manulife Financial (NYS: MFC) products have put stress on the insurance companies that provide them, they can still give you some peace of mind -- albeit at a cost that you may not find affordable.

Moreover, being financially independent can actually increase your resources. For instance, by waiting to take Social Security until age 70, rather than taking early monthly payments at age 62, you can boost your monthly benefit by more than 75% for the rest of your life.

Count on yourself
In the end, the best retirement resource you have is yourself. If you set up your own finances, you can ensure that anything you get from other outside sources is merely icing on your retirement cake that will let you enjoy your golden years that much more. Meanwhile, if the worst happens, you'll still be prepared -- and you'll be in the best position you can to have the comfortable retirement you want.

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At the time thisarticle was published Fool contributor Dan Caplinger fights to win. He doesn't own shares of the companies mentioned in this article. The Motley Fool owns shares of Bank of America. Motley Fool newsletter services have recommended buying shares of General Motors and 3M, as well as creating a diagonal call position on 3M. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy fights for you.

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