Curb cash crunch in retirement

NEW YORK (8/30/10)--What are the chances you'll run short of money in retirement? The Employee Benefit Research Institute, Washington, D.C., predicts that 47% of early baby boomers ages 56 to 66 and 43% of late boomers ages 46 to 55 are at risk of having insufficient income in retirement to cover basic retirement expenses, as well as uninsured health care costs (EBRI July 27).

To help, Smart Money.com (Aug. 20) identifies six relatively painless ways to close the income gap:

Ditch high-cost debt. Aim to step into retirement debt-free. Pay as much as you can afford on highest interest-rate debts first while still making minimum payments on all other debts. Once you pay off the highest-cost debt, keep whittling away until you pay off all of them. Getting rid of mortgage, auto, and credit card payments in retirement could save you thousands of dollars or more a year.

Weed out unnecessary insurance. You probably don't need a disability policy in retirement. Similarly, weigh the pros and cons of cashing in your life insurance policy if you no longer have dependents and your spouse could easily support him or herself. When making the decision, calculate the financial loss to your family if you die, and then factor in the cost of the premiums.

Scale down this old house. Fewer rooms and square footage translate to lower expenses--upkeep, maintenance, utilities and taxes. Or, move to a less expensive area.

Get rid of energy guzzlers. Replace older appliances with new Energy Star models, switch to compact fluorescent bulbs, and ask for a free or discounted home energy audit. Visit doe.gov for guidelines to conduct an audit on your own.

Trim high investment fees. You may be paying too much if your fees are more than 1% of your portfolio value. Ask for a fee reduction if you think you're being overcharged, or search for a fee-only adviser at NAPFA.org.

Lose the landline. If cell phone reception is a problem, consider getting a signal booster. Visit BillShrink.com for the low-cost cell phone plans.

For more information, listen to "Are You Worried About Your Financial Adviser?" in Home & Family Finance Resource Center.