Nearing retirement? Here's how to ease the transition.

The transition from full-time work into retirement is a time of promise. But it also can be a time of challenging financial decisions. For years, those nearing retirement have been urged by financial experts to "save, save, save" – and pay down debt. But after the nest egg is built come some complicated questions. Is that nest egg big enough to retire now? How much can I spend each month? Should I convert some savings into an annuity?

For millions of Americans, notably the baby-boom generation that began turning 60 this year, the time to address such questions is near.

They will be following the path of people like Craig Hayden of Glendora, Calif. He retired three years ago after a career as a business analyst at 3M (formerly Minnesota Mining and Manufacturing Co.).

Unlike most of today's employees, who are only offered defined-contribution retirement plans such as a 401(k), Mr. Hayden retired with a defined-benefit plan paid for by his employer. Currently, that traditional pension and Social Security provide most of the income for Hayden and his wife. "Without the pension ... I would have had to put a lot more into a 401(k)," he says.

But for those about to retire, having enough money to maintain living standards is becoming more difficult. The Center for Retirement Research at Boston College recently developed a "national retirement risk index" that gauges how many Americans are at risk of a lower standard of living in their retirement. The index has been rising – a negative sign for millions of people. Some 43 percent of Americans are on track to fall short, by 10 percent or more, of the goal of replacing about three-fourths of their preretirement income after they stop working. That number, based on Federal Reserve data for 2004, is up from 38 percent in 2001 and 31 percent two decades ago, the center calculates.

The reasons for this trend include:

•Increased longevity, so nest eggs must last longer.

•Fewer traditional pensions and more 401(k) plans, where saving is voluntary and the payout is not guaranteed for life.

•Low rates of personal savings.

•Leaner returns on investments.

•Rising healthcare costs, outpacing the average change in the price of other goods.

Such trends not only make it more difficult for workers to build savings, they also create more uncertainty as they near retirement age. Here are some pointers that financial planners are offering those about to retire.

For people about to navigate from full-time work into retirement, this may be a time to get some extra help.

"Having objective professional advice is important at that point," says Rick Miller, a planner who owns Sensible Financial planning in Cambridge, Mass. "One is making an enormous decision when one decides to retire,"

A financial professional's skills should mesh with your needs. Some planners know more about estate planning than others do, for example.

Many planners also derive their earnings in part from selling insurance, annuities, and other investment products. Some experts argue that the most objective financial advice may come from those without such financial ties.

"I would be the last person to suggest that you can't get through life without having a financial planner," but many people do benefit greatly from such a strategy, Mr. Miller says.

Before taking the retirement plunge, closely examine your annual spending habits – and forecast how well your retirement income will cover those expenses.

"Is the mortgage paid off? What are your costs for real estate taxes, maintenance for your house, and other operating expenses?" asks Jim Pinney of Pinney & Scofield, a financial planning firm in Cambridge, Mass. Add in the "optional" things you hope to spend money on, such as substantial monetary gifts to grandchildren, he says, and consider where that money will come from.

Once ties are severed with a full-time employer, returning to work remains an option, but finding the same level of pay is tougher, Miller says. "The value of one's human capital is going to drop."

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