Most Americans focus on saving for retirement during their working years and don't think much about how they're going to spend their nest...

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NEW YORK — Most Americans focus on saving for retirement during their working years and don’t think much about how they’re going to spend their nest eggs in retirement.

But planning is important if today’s retirees — who can expect to live much longer than their parents or grandparents — hope to avoid outliving their money.

It’s a timely issue for baby boomers, who begin turning 59 ½ this year, making them eligible to begin drawing money without penalty from tax-deferred accounts, such as Individual Retirement Accounts.

And some of those boomers also may be aiming to retire at 62, when they can start drawing Social Security benefits.

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“This retirement isn’t going to be your parents’ retirement,” said Michael Tilles, a financial planner with American Express Financial Advisors in Walnut Creek, Calif.

“People are going to live longer. They’re going to be healthier longer, so they’ll need to spend money longer. And many don’t have the secure pension plans their parents had.”

As a result, Tilles said, people need to start retirement calculations early — determining how much they’re likely to get from Social Security, retirement annuities and their own savings — and balancing that against what it will cost to live over the next 30 years. Figuring out which accounts to tap and when to tap them is critical to making the money last.

Tilles worked with Dan and Rose Marie Glaze to help the California couple edge into retirement last year.

“You have to be really realistic,” Dan Glaze said. “You can’t wish success in retirement. You have to do some very hard planning for it.”

Mortgage paid off

For Glaze, who is 56, the first step was to pay off the mortgage on the couple’s home in Vallejo, Calif.

He then left his job as an environmental engineer for Shell Oil in April 2004 and began part-time consulting work with local refineries, “a bridging strategy” that allows the couple to avoid using their retirement savings right away.

He draws a pension but hasn’t tapped Social Security. His wife, meanwhile, plans to work at least two more years before she leaves her job as a first-grade teacher.

“Our goal is to protect our nest egg so we won’t have to touch it until we really need to draw it down,” Glaze said.

When he taps that money, he intends to do so in a disciplined way because he wants it to last.

“You have to be concerned about inflation going up the longer you’re around, about taxes going up — not to mention the possibility of a long-term care situation,” Glaze said.

Experts offer a variety of suggestions on how retirees should approach tapping their retirement savings to supplement their Social Security checks.

Christine Fahlund, a senior financial planner at T. Rowe Price Associates, an investment-management firm based in Baltimore, said it’s a good idea for workers nearing retirement to set aside cash to cover expenses for about two or three years so they’re not forced to sell stock or bond holdings in a down market.

These funds can go into money-market mutual funds or short-term bond funds or certificates of deposit, she said.

When it comes to tapping savings, Fahlund said, people should plan on withdrawing about 4 percent of their assets in the first year.

“More than that, and you risk burning through your money too fast,” she said.

Assuming a worker has saved $250,000, that 4 percent would come to $10,000 in the worker’s first year of retirement. The next year, Fahlund suggests, the retiree should increase the dollar amount by 3 percent for inflation, or to $10,300, to maintain purchasing power

“What you want is a steady paycheck, something that’s predictable,” Fahlund said.

One adviser’s tip

Bruce Harrington, a vice president at MFS Investment Management in Boston, said that baby boomers should consider consolidating their tax-deferred retirement accounts, such as IRAs and 401(k)s from previous employers.

“That will make it easier for you to look at the total picture,” he said.

Because these tax-deferred accounts don’t have to be tapped under Internal Revenue rules until age 70 ½, it’s best to plan on drawing from taxable accounts first, Harrington said.

“Start with your more aggressive assets — individual securities, then equity mutual funds,” Harrington said. “But don’t go down to zero. You need 20 to 40 percent in equities in your retirement years to keep up with inflation.”

Tilles, the California planner, uses what he calls a “cash bucket” approach to helping retirees manage their money.

He “fills” the bucket with the cash a retiree will need for the next two or three years. Then, when he reviews a client’s portfolio every six months or 12 months, he looks at which assets did best.

“I’ll trim them to rebalance [the portfolio], and that goes to replenish the cash bucket.”