Happy birthday and congratulations! You have successfully maneuvered through the tricky waters of life and now you've reached retirement age, whatever that may be when it's your time to retire and relax. How are you going to be able to afford the lifestyle you would like to be accustomed to now that you have the opportunity?

Let's make a few assumptions going into this article and then we will discuss your options from there. First, let's assume you have funded your 401(k) or other employer sponsored plan to the max over the course of your working life. Assuming you averaged an annual growth of 10% during that time, you have a few bucks stashed away.

A second assumption we will make is both you and your spouse qualify for the maximum benefits under your own earnings records. For a married couple with both spouses retiring in 2004, that amount will equate to approximately $1,784 monthly for each person. Rounded, this means your Social Security Income will be approximately $43,000 per year.

A third assumption we will make is that you don't have any significant debts and your children are indeed "off the gravy train."

Now that we have painted as rosy a picture as possible, let's take a look at some of your alternatives.

Your first alternative is to live life to the fullest with no thought to tomorrow. Your Social Security benefits will provide you with a pretty good income even if you don't have other retirement accounts on which to draw, but let's say you have built up $1.5 million in retirement accounts and another $500,000 in other investments, excluding the house. All things considered, you should be able to live rather well with what you have stashed away.

Your money may even make it to the end of whichever spouse dies last, but be aware that word "may" can be a pretty big hole in your retirement planning. While your nest egg may seem good based on "average" annual earnings, your earnings from year to year on the retirement and investment accounts will fluctuate. If you're not careful, you can wind up spending so much in the lean years that there is little principal on which to earn investment income in the fat years. Also, you need to remember that any withdrawals from retirement accounts (assuming they are not Roth IRAs) will be taxable income. This will definitely reduce the amount of funds available for retirement.

If life is so uncertain, perhaps you should be the conservative investor and live solely off of your Social Security benefits. This is fine if you don't plan on living to age 70 1/2. In the year you become 70 1/2, you will be required to start taking required distributions. Assuming you live long enough, you will start paying tax on retirement savings.

Your best strategy is likely to be a middle of the road approach. First, make sure that your retirement accounts are properly balanced with a more conservative mix of equities and fixed-income securities. You are now in a position to start seeking to minimize the market risk on your retirement savings. You should also take a look at the non-retirement savings and include it in the balancing of your portfolio. From a tax perspective, however, it is best to leave the regular investments alone if they carry a high value and low basis. Looking at the big picture, you should be able to move funds around in the retirement account(s) to achieve a more conservative balance for your portfolio without incurring high tax costs.

It may also be time to annuitize some of your investment.. While annuities may not return as much as other investments, they can provide a steady cash flow.

Let’s turn the tables a bit and assume you don't have large retirement accounts, but you have been fairly successful in your after-tax investments. If you are heading for retirement or are already retired, you still need to look at having a conservative portfolio. Since you won't be able to move all your investments without a tax consequence (assume you have a gain in all your investments), develop a plan to reallocate over a several year period. This will help minimize your tax burden, especially if you have assets that don't qualify as long-term capital gain property.

As we mentioned earlier, in our economy, even $2 million can be spent rather quickly. If you are in a nursing home or incur high medical costs, it doesn't take long to move from riches to rags. For this reason, make sure you have an appropriate long-term care policy. Take the money you have been paying the life insurance company for your term policy and use it for the long-term care policy. At this point in your life, unless you have a very large estate, your needs to hang on to the term life policies are most likely gone. You don't need to provide a safety net for your children if you die and your estate won't need the cash for taxes. Why not get a policy that will preserve your assets for your spouse and the remainder of the family?

While we are on the subject of insurance, let's talk about your Medicare benefits. Unfortunately, Medicare has its limits, especially in the drug arena. We suggest you get a Medicare supplement policy that will pay for what the Medicare will not cover.

Heading into retirement is a perfect time to verify that the beneficiaries on any retirement accounts or insurance and annuity policies are those you intend to benefit. This is especially true for people in their second or subsequent marriage. This, along with a properly drafted will and power of attorney should ease the transition for your loved ones.

Much of what we have discussed is more common sense, but you would be surprised at the number of people who need a gentle nudge. We sincerely hope that your finances are such that your retirement years are sufficient to make your retirement years truly golden ones. If you need assistance or simply want a second opinion on your planning, give us a call. We are here to help.

Happy May and please keep our troops in your thoughts and prayers.