5 Ways To A Richer, Fuller Retirement

With a little effort, retirement could be a lot better for a large number of people, says certified financial planner Marc Freedman, the author of the new book Retiring for the Genius and CEO of Freedman Financial in Peabody, Mass.

What some retirees need to do is rethink their approach and create a new blueprint, he says. Freedman offers these five ways retirees can create a richer retirement:

Don't rely on your parents' model of retirement

Years ago, many people got a pension or Social Security or both, and they supplemented their needs by living off interest from their money in the bank, often not touching the principal, he says.

Today, it's different. Pensions for private-sector employees are essentially gone, and Social Security doesn't provide enough income to support many people's needs. Instead, people are now responsible for creating a retirement income paycheck from their investments, and they are often scared, he says.

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"Even with interest rates at dismal levels, some retirees are still looking to interest-bearing investments as a primary source of income. It doesn't work that way any longer. You need to explore dividend-paying investments, and/or investments that have a growth component as well," he says.

Consider a total-return approach to supplementing your income, Freedman says. "Draw income from dividends, interest and even some growth from your investments. Take a close look at your total financial picture and then work to create an income stream."

Evaluate your net worth

A successful retirement starts by assessing everything you own and subtracting everything you owe to come up with your net worth, he says.

In retirement, many different assets — home, investments, annuities, IRAs, insurance policies and money in the bank — can provide sources for income. And don't forget, with interest rates so low, carrying some debt on a home may be a smart use of money, he says.

Take a hard look at your investments

Having personal investments in cash or low-yielding investments can hurt your ability to supplement your spending needs as the years go on, he says.

Freedman says that for the average investor, individual stocks are too volatile, so he recommends considering mutual funds. These professionally managed pools of investments provide you diversification, liquidity and participation in the future of both domestic and world economic growth, he says.

"Yes, the accounts will fluctuate, but not nearly as much as individual stock ownership. And by owning a collection of stocks and/or bonds in a mutual fund, you spread out your risk and move more smoothly through volatile market cycles."

Don't sacrifice your own quality of life to leave an inheritance to the next generation

If all you do is live off the interest from your investments, the kids will receive a lot of money; not to mention the value of your house and insurance, he says. So find a healthy balance between enjoying your retirement and providing a legacy to the next generation.

If you have the extra money and want to do something for your family, here's an idea: Consider including your children and grandchildren as participants of your good fortune now. Plan a family cruise, a weekend in the mountains or a trip to visit your family's roots. It's a great way to reconnect with those you love and spend money in a manner that warms your heart.

Beware of taking Social Security at the wrong time

Unfortunately, too many retirees begin to take Social Security at age 62, he says. "They elect to take their reduced Social Security benefit (80% of the full retirement amount), and then realize that they'd like to return to work — only to find out that if they earn more than $15,480 in 2014 they'll need to begin paying back part of their Social Security check."

Freedman's advice: If possible, wait until at least 66 or older to take the Social Security benefit. After that, you can earn as much or as little as you want and not give back any of your Social Security income, he says.

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