Diversity key to retirement savings

NEW YORK -- How much should I save for my retirement? The quick answer is this: more than you think.

The harsh fact is that you usually must have both saved and invested more than you thought you'd require in a variety of stocks, bonds, funds, metals and other commodities, in order to lead a comfortable life in retirement.

Many are the reasons you will need more. Take demographics. We have an aging America whose people are living longer with every passing year and whose corporations and unions are paying out less than before. So the supply of the goods and services that retirees want is shrinking, while the demand for what retirees want is growing.

Just consider how much longer Americans have to live in retirement than their parents did or will. Many folks have to support themselves for 10 or 20 years more than their parents did simply because the younger people will be living longer.

Just because today's retirees assume they will be making more demands upon the system, we cannot make assumptions about growth in the values of stocks, bonds and other investments. Nor can we assume declines in specific categories of investments and savings.

Many expert stock analysts believe in an even wider diversification of investments than in the recent past. It often pays to diversify your many investments in relatively small packets.

For example, as reported by the New York Times, Harold Evensky of Evensky & Katz Wealth Management likes short-term tax-free accounts, and Edward Yardeni, a noted investment analyst, prefers a mix of high-quality bonds and dividend-paying stocks. But even the relatively modest individual investor should aim for a much more diversified portfolio than that: not just one but, ideally, 10 or more common stocks and 10 or more bonds, as well as perhaps some gold and other commodities.

If one or more of these investments turns temporarily sour at some time, the investor can take shelter in the other issues or commodities. Working over a period of years, the investor can build a diversified shelter to guard against a bearish assault that is bound to come at any time.

Meanwhile, there are several steps you can take right now to protect your assets.

One is to go immediately to your bank and check how much interest you are collecting on your checking, savings and other accounts. You probably can arrange to collect more interest by shifting to other accounts at the same bank that offer the same degree of protection.

How much should you save now? Here's a plan that states the bare minimum: Add up your savings of all kinds. If you're 40 or younger, you should be saving or investing at least 5 percent of your pretax pay every year. If you're between 40 and 45, you should step up your saving by at least 10 percent a year. After age 45, put away 10 percent a year.

After several years, with safe and simple steps like that, you ought to start building a retirement fund, one that should see you through your great age.