Go ahead, retirees, live a little

Monitor your accounts

Retirees report being very or somewhat concerned about inflation (76%) and a decline in the stock market (64%), AARP found, and rightly so.

"You don't know what future returns will be, and those healthy returns of the past few years don't always hold up," Reichenstein says. Because of that, many retirees make timid investment choices. If the value of their investments dropped by even 5%, nearly two-thirds of retirees say they would change their spending the next year.

But some retirement experts believe you still need to take a bit of risk with your portfolio in the early years of retirement if you want that money to last as long as you live.

"Most people who are in their older age go to bond or money-market-type investments," Copeland says. "There is a need to invest in stocks for longer. If you're healthy and you have good genes, you can expect to live 20 years (in retirement). You don't want to be 90% in fixed investments."

And if you do happen to have a good year, tuck the money away for leaner times. "Even if the account is up 5% or 10% in a decent year, you want to keep the return of that at work for you for a rainy day, because there are going to be other accounts that aren't doing as well," Medland says.

Plan for unexpected expenses

About 63% of retirees also worry about having to pay for health care and prescription drugs, AARP found. And about a third think it will be difficult to keep enough money for needs in later life.

Long-term-care insurance can help, but, just like when you're working, it's a good idea to have an emergency fund to help you though rough spots.

When spending down your nest egg, "you still want to leave a safety margin," Medland says. "Because you could live to be 100."

This article was written and reported by Emily Brandon for U.S. News & World Report.

Published Feb. 29, 2008

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