Retirement? Think of 70 as the new 55

Ah, retirement -- those lazy, hazy days of shuffleboard, cruise ships and daytime TV.

Enchanting as it may sound, the sad truth is, life at 65 will never be the same. The traditional image of a carefree retirement is an experience most of us will never see.

"People are taking better care of themselves and they're living longer," said Minneapolis investment adviser Tony Parr. "But that means someone retiring at 65 will have to provide for themselves for another 20 to 25 years or more." Only a small percentage of retiring baby boomers will be able to bankroll for that long the lifestyle to which they've grown accustomed.

Even if you started early and planned carefully to reach retirement with an adequate nest egg, life has a way of conspiring against us. Layoffs, college costs for the kids, health issues, divorce and underachieving investment portfolios all can cut into our retirement reserves.

If that wasn't evident before the recession, the current bout of rising unemployment, failing businesses, collapsing home values and falling investments has made the task of accumulating an adequate retirement portfolio more daunting than ever.

"The reality is that many people will have to continue working long past age 65," says Heather Harden, a Bloomington-based branch manager and financial adviser for LPL Financial.

What will it take?

How much will you need to fund a comfortable retirement? Think millions -- if you plan to live an active lifestyle.

"At a minimum," says Harden, "you need $1 million in savings, no debt and your house paid off."

Others take a different view. Jon Meyer, president of Bloomington-based Boeckermann, Grafstrom & Mayer Wealth Management. "There's not a hard number that works for everyone. You have to decide how much you're going to need to spend each year and calculate the retirement savings you'll need based on that."

If you expect to need $50,000 a year, and you anticipate receiving $12,000 a year in Social Security, you'll have to raise an additional $38,000 from your investments. "With a 4 percent withdrawal rate," says Meyer, "you would need about $950,000 to generate that kind of income. If you don't have that much, you either need to cut your expenses, take a part-time job or retire later."

Think $1 million - just to cover basics

Although a million dollars might be enough to pay the bills, Parr points out that "most people want to do more than just get by." In fact, depending on how the money is invested, $1 million might not even be enough to cover your basic expenses -- particularly after the effects of inflation.

A million dollars invested in 10-year U.S. Treasury bonds with a current rate of about 2.5 percent would only yield about $25,000 a year -- which is barely over the poverty level.

And that's before inflation. "You need to plan for about a 3 to 3.5 percent inflation rate," says Parr, who serves as managing director-investments of Parr Financial Group of Wells Fargo Advisors. "At that rate, the cost of living would double in about 20 years. That means you'll need twice the income to pay for the same lifestyle in 20 years."

One solution, suggests Harden, is to change your mind-set on investing. "You can't afford to get conservative in your retirement years," she said. "You need to break the rules and think like a 35-year-old. If you want your investments to last, you need to put together an aggressive portfolio."

In fact, not only does Harden recommend that you keep a significant portion of your assets in stocks, she urges investors to forgo the long-held principal of buy-and-hold. "If your idea is to buy a stock to hold for the long term with no plans to sell it, you've set your mind on a ridiculous principle," says Harden. "The concept that a stock goes straight up and never stops has never been true. You need to buy and have an exit strategy."

Either way, unless you have substantially more than $1 million in your retirement savings account, you need to start thinking about finding another source of income -- whether it's a part-time or full-time job, or your own little business.

"Seventy is the new 55," says Harden. "It's true that people will have to continue working, but a lot of them would have continued to work anyway. I have a client in her 70s who still runs her own consulting business. She is as fit and vibrant and capable as she's ever been."

She also represents a growing movement of Americans who will be working longer whether they want to or not. For most of us, it's no longer about just saving harder and investing smarter. Right now, it's all about planning your next career.

Gene Walden lives in the Twin Cities and is the author of more than 20 books about business and investing. Send questions to gwalden100@comcast.net