Spend more efficiently

This advice may appear to be obvious, but what's not so obvious are the steps you

can take to trim your expenses significantly. The first step is to get rid of as much debt

as possible, preferably before you retire. This includes paying off your home mortgage

as well as any credit card or home equity debt. Once you've done this, you may find that

you need a lot less money to live on than you thought.

Then, take a fresh look at your insurance requirements. If your children are grown

and tuition payments are behind you, you may no longer need life insurance. Raising

the deductibles on your homeowners and auto insurance policies can save you money

as well. On the other hand, when it comes to health insurance, your need for adequate

coverage takes on additional significance. To save on premiums, consider switching from

a traditional indemnity policy to a managed care plan. Locating better Medigap

policy deal is another potential money saver.

Once you are retired, look for ways to trim your entertainment expenses without

depriving yourself. Whether it means renting a movie rather than going to one or

borrowing a library book instead of buying the latest

best seller, little cuts can add up to big

savings. Also, be sure to take advantage of

special deals that airlines, hotels, and restaurants

offer retirees. Many retail outlets also offer discounts on certain days to retirees and

older adults.

Take a post-retirement job

Whether the underlying need is for extra money or self-fulfillment, more and

more retirees are deciding to work at least part

time in retirement. If your plans call for a post-retirement job, you have a number of

options. You can look for positions in your

current field, perhaps on a part-time or

work-at-home basis. However, you might get more

enjoyment out of turning something you've enjoyed as an avocation into a sideline

business teaching a course, refinishing

furniture, gardening or landscaping.

Concerned about losing Social Security benefits? If you are between ages 62 and

64, you can earn up to $9,120 in 1998 without affecting your benefits. Retirees age

65 through 69 can earn up to $14,500 before facing reduced benefits, and, one you turn

70, you can earn as much as you like with no reduction in benefits. There are also limits

to your gross income before your Social Security benefits are taxed. That's why it's

important to make sure your new venture is not going to cost you more in income

taxes, reduced benefits and work-related expense than you're making.

Know how and when to withdraw

When you start withdrawing funds for retirement, as a general rule, it's best to

begin with investments that aren't tax sheltered such as Social Security and bank

savings accounts, stocks and bonds, and mutual

funds. This allows the funds you have invested in tax-sheltered 401(K)s, Keoghs and IRAs

to continue compounding tax-free as long as possible, Keep in mind that any funds

you withdraw will be taxed as ordinary income. What's more, generally, you can't tap

into retirement accounts without penalty until you reach age 59.

Make a move or use equity in your home

If your current home is more house than you need, consider moving to a smaller home

or relocating to an area where the cost of living is lower. This may be easier now that the

one-time exclusion for taxpayers age 55 and older has been replaced by more lenient

capital gains rules. Under the new tax law, you

generally can exclude up to $250,000 ($500,000 is married, filing a joint return) of gain

realized on the sale of a principal residence as long as you owned and lived in the

residence for two out of five years before the sale date.

If you prefer to stay in your home but don't think you'll have the cash to make ends

meet, the reverse mortgage lets you borrow against the equity you have built up in your home

and receive the proceeds in the form of regular monthly payments or a line of credit you

can draw upon as needed. The amount of money you can take out of your home depends

on your age, the home's market value, and current interest rates. Just be aware that the

more cash you take out of your home, the more you risk losing ownership completely.

If you would like more advice concerning how to make the most of your

retirement income, you may want to consult a CPA.

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