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By Jason Stipp and Christine Benz | 08-07-2013 12:00 PM

Retirement: 7 Ways to Stack the Deck in Your Favor

With so many uncertainties facing investors, it just makes sense to give your retirement plan some extra breathing room.

Christine Benz: Hi, I'm Christine Benz for Morningstar.com.

As we prepare for retirement, there are some variables we have no power to predict, such as how long we'll live or how the market will perform. But there are some easy steps you can take to stack the deck in your favor.

Joining me to discuss some of them is Jason Stipp. He is Site Editor for Morningstar.com.

Jason, thank you so much for being here.

Jason Stipp: Great to be here, Christine.

Benz: Jason, you have been compiling a list of best ideas from a lot of people around here, people we've interviewed and so forth, of ways that you can make your retirement go smoothly, even if you don't know exactly how it will play out.

One of them is coming into retirement without a big housing bill. Let's talk about why that can be so impactful.

Stipp: For most people, while they're pre-retired, their biggest expense, and over time their biggest asset, will be their home. If it's 15% or 20% of your pre-retirement income, if you can take that off the table, then you can really see how that begins to chip away at the [income] replacement rate that you need in retirement. If you're targeting an 80% replacement rate, and you can chip off that big expense, it becomes a lot easier, then, to just have your portfolio and Social Security cover the discretionary income [you need]. It's a big, important way to add some buffer space.

Benz: I know some people do that just by downsizing. If they're able to swap into a smaller home, they can get rid of that mortgage note and have those housing costs covered.

Another category is to simply delay retirement. Let's talk about why that can be so beneficial as you come into retirement.

Stipp: Folks we've talked to from T. Rowe have done a lot of great research around working a little bit longer. It might not sound like the most appealing option, but there are some really great benefits: three key ones.

First of all, if you work longer, that means you won't be tapping your portfolio. It allows your portfolio to grow for those one or two or three extra years that you're in the workforce.

Secondly, on the flipside, it will effectively shorten the duration that you need that portfolio to last. Your portfolio will shave off a few years [that it needs to fund]. As you work a little bit longer, your retirement will be a little bit shorter, so that's also a benefit.

For a lot of folks, they like to stay engaged. They want to be with their colleagues and they like the fact that they will still be out there in the workforce. There are some psychological benefits as well.

The one thing I would say, though, is you shouldn't depend on being able to work longer. It might sound like a great backup plan. A recent survey mentioned that 70% of pre-retired folks were counting on working in retirement, but only about 30% of folks in retirement actually were able to do so. So, it's a great option if you can take it, but don't necessarily depend on having to work longer.

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