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Your money: Feel more in control of your retirement

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The rocky financial markets are keeping many people up at night, especially if their retirement looms. Worried minds begin to wonder: Have I saved enough? Am I overexposed to the stock market?

Before you hit the panic button, though, take a closer look at two of the biggest “warnings” you’ll hear in the retirement-planning world right now:

Warning No. 1: You probably haven’t saved enough. Does a couple really need 70% to 80% of their preretirement income to maintain their standard of living? After age 75, spending typically drops, since retirees face lower taxes and no longer have child-rearing expenses.

When financial advisors urge a client to save more, it may be an effort, at least in part, to bump up their commissions or fees. The “magic number” you get from online calculators telling you how much you need to retire is only basing its estimate on a handful of questions.

Fact: Some popular calculators are very conservative, assuming that retirees’ investments will earn only 1% per year above inflation, even though large-company stocks have beaten inflation by nearly nine percentage points annually over the past 20 years.

As a rule of thumb, the fewer questions your financial planner (or your online calculator) asks, the less accurate the final outcome is likely to be. Question your financial planner early to see what assumptions she’s basing her estimates on.

Warning No. 2: You have to invest more conservatively. Conservative vehicles such as money market accounts, bonds and annuities are designed to shield investors from stock market losses. Put too much money in them, though, and you could also be immune to stock market rebounds.

Investment advisor John Bacci says that every time the economy hits a rough patch, he has a ready answer for skittish clients: “You’d rather retire when the market stinks than when it’s good. There’s a higher likelihood your portfolio’s got nowhere to go but up,” he says. And the more years you hope to live in retirement, the more you’ll need that kind of growth in your savings.

— Adapted from “The 3 Biggest Retirement Fear Factors,” Angie C. Marek, SmartMoney.

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