Ways to stretch your retirement income

Many Americans could see their money dry up before retirement ends. The reason can be shortage of traditional pensions, paltry savings levels and ever-expanding life spans. There are ways to stretch your retirement income.

Most financial gurus agree that you reduce spending by at least 24 percent, according to a 2008 study by Ernst & Young.

You can also stretch your retirement income by proactively managing your investment accounts and savings, which means understanding how they produce income over time and what risks they carry.

Do a cash flow analysis
A comfortable living in general and retirement in particular is largely a function of wants, needs and how much money stands between the two. As a rule of thumb, some experts say that you can expect to live on 80 percent of your pre-retirement income. Your first step is to figure out how much money you will need each month to pay your expenses.

The most important message about doing cash flow analysis is to assess and reassess your financial situation.

Delay retirement
The median retirement age for retirees increased from age 59 in 1991 to age 62 by 2003, according to a 2009 survey by the Employee Benefit Research Institute.

The upside of working into retirement is that you have more time to build up your retirement accounts and take advantage of company-sponsored medical plans.

Delay collecting Social Security
Social Security benefits are based on your lifetime earnings, using a formula that factors in the 35 years in which you earned the most money. If you give in to immediate gratification and start collecting at age 62, your benefits will be reduced by 20 to 30 percent than if you wait until full retirement age, depending on your year of birth.

Rebalance your portfolio
Experts recommend that your investment accounts be reviewed periodically for increased return potential, and if necessary, your portfolio should be rebalanced. Rebalancing can help you match your investments with your original goals or accommodate your changing needs.

Catch up on your 401(k)
Most Americans rely on defined-contribution retirement plans such as a 401(k) to save for retirement, but most of us don't seem to be saving enough. The average worker contributes about 7.5 percent of his or her salary toward a 401(k) or 403(b) retirement plan, according to the most recent data from EBRI.

Depending on your age and your account balance, catch-up contributions could add a much needed boost to your retirement account, especially if returns are good while you accumulate the money.

Downsize in retirement
Downsizing in retirement is no longer for folks on the fringes. It's becoming the new chic. You may not have to downsize if you have enough saved to carry you through retirement. But if you don't, you'll need to make some adjustments.

Strive for good health
By eating healthy and exercising, you can cut down on out-of-pocket medical expenses substantially. Many of the most common conditions, including cardiovascular disease, diabetes and orthopedic ailments, are often preventable or manageable with proper diet and exercise.

In a Nutshell
Curbing spending will undoubtedly help your money last longer, but it's not the only factor in the equation. Follow the above that most experts agree on and you can easily stretch your retirement income.