If you're listening to the same economic news I am, you're probably nervous. Bad economic news means retirement worries. To sidetrack a recession, our government has printed a lot more money to bail out the bad boys, pay for imported oil and more, and spur demand for everything from apples to zucchini. More money is now chasing the same, or fewer, things to buy. The inflation rocket has been launched. The double bogey is higher prices combined with lower interest earnings on your savings [looked at CD rates lately?]. Once the elections are over, the triple bogey will be higher taxes across the board, including on your Social Security benefits, to balance the ballooning budgets of governments at all levels. If you have your money exposed to risk - say in mutual funds, stocks, investment real estate, or anything else that waxes and wanes - you could be in for times-two double bogey if not a quadruple bypass. What can you do to recession proof your lifestyle?

Let's start by dividing your retirement money into three categories: (1) money you'll need during the next five years; (2) during year six through about year 15; and (3) money not needed for at least 15 years. These categories can vary slightly between individuals; thus, I recommend you work with a financial advisor to help you determine what is right for you and your family.

The first category should be kept in "super safe and super liquid" places. Places like cash, money market accounts, bank CDs, money market mutual funds, savings accounts, and high quality bonds that mature in less than five years. I know the rate of return will be depressing, but you need easy access and safety. I know you want a higher rate of return along with low risk, but risk and reward don't work that way. By using a financial advisor, you can select the proper mix and amount of these low-rate, super safe investments. Your retirement income is now covered for five years.

Category two is the places where there is some liquidity - just in case there is an emergency - but also tax deferral and safety. At this point in history, there are not many options for this category other than fixed and index-linked annuities. While you may not know anything about annuities now, you need to "get educated" or work with a financial advisor who understands annuities. By the way, you'll want to avoid advisors who don't understand annuities or have a vested interest in "selling" you something else, because they'll recommend against them. To bolster your understanding, read my "Is Your Annuity Good or Bad?" booklet.

The last category is probably where you currently have most of your retirement money: mutual funds, stocks, long-term bonds, REITs and other investments that Wall Street proclaims, in a very loud voice, that you should own. All these have one thing in common: risk. To offset this risk, you should be prepared to leave your money in these investments for a minimum of ten years and probably fifteen to be cautious. For example, as this is written the last peak in the stock market indexes (DJIA, S&P, etc.) adjusted for inflation was in 2000. We are coming up on ten years, and the markets have not yet recovered from the dot.com bust of 2000-2002. How long will the sub-prime and housing bust keep the markets depressed? No one knows - they may say they do, but no one can see the future. While you still have some risk with this category, most past market cycles have recovered within fifteen years. A good policy for retirees is to keep the percentage of your money exposed to the market no greater than: 100 - (age + 10). If the oldest spouse is age 70, then no more than 20% in the market.

What was covered above is called an investment ladder for the retirement-minded. It is not sexy or risky, but it does position your money to last through retirement. Since each family's circumstances are different, I strongly recommend that you engage the services of a financial advisor to help you craft a personalized retirement plan. By the way, you can put all this on automatic by buying a fixed annuity that offers a guaranteed lifetime income benefit. Recent innovations in fixed annuities have made them super attractive if your greatest retirement fear is outliving your money.

Shelby J. Smith, Ph.D.

of TheRetirementPros.com

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