Q: My husband and I will soon join the ranks of retirees. We are in our upper 60s. We have no debt. We will have adequate income from Social Security and pensions— at least for now. But after consulting with different investment advisers about our entire portfolio — mainly a 401(k) that didn't lose much, IRAs and CDs— we have come away with as many different opinions as there are advisers.

Usually, they specialize in only one angle while ignoring the entire financial picture. After reading your recent column to the "80-somethings," I came away with the idea that our search for the near-perfect way to set ourselves up is futile. There seems to be no consensus on what to do with investments in order to have an adequate income in the future— except to diversify.

To some that means one thing, to others, another. And of course, every individual's circumstances are entirely different. Can you offer any really broad guidelines to follow when planning one's retirement future, especially in light of the economic times we find ourselves in?— K.D., Grand Prairie, Texas

A: Here are the essentials for a secure retirement:

  • Eliminate all debt. You do this because it takes more than $1,000 of retirement asset earnings to service $1,000 of debt. It is particularly important to eliminate debt if the bulk of your retirement savings is in tax-deferred qualified plans. Just because you are credit-worthy doesn't mean borrowing money is a good thing to do.
  • Take careful measure of your spending priorities. Many retirees never think about their de facto commitments. Many, probably most, retirees are overcommitted to real estate. They would benefit from a serious reconsideration of the size of house they live in— and whether they should own or rent. Downsizing or becoming a renter is likely to provide a major increase in discretionary spending power.
  • Nail down some secure monthly income. This was easy until recently because many people retired with Social Security, a company pension and retirement savings. Today, an increasing number of retirees don't have pensions. You can create a personal pension by converting a portion of your savings into an individual life annuity or a joint and survivor life annuity. The amount of income from the annuity is high enough that you won't have to draw as heavily on your remaining assets for monthly spending.
  • Minimize all investment expenses. Remember, it's YOUR money. You should have the bulk of its return. The financial services industry will happily sell you products that take all the current income in fees, leaving you with all the risk. You can minimize investment expenses easily by becoming an index fund investor. With investment products that have expenses of 3 percent a year, the self-directed alternative can liberate the entire dividend and interest yield of a diversified portfolio— for you to spend on yourself rather than pay out in fees.
  • Diversify across asset classes. No one knows the future, so it is foolish to focus on a single type of asset. Start with domestic fixed-income, expand to domestic stocks, and then branch out to international stocks, international fixed-income, REITs, energy and emerging markets. This can all be done at minimal expense by building portfolios such as my Couch Potato Building Block portfolios, Bill Shultheis' "Coffee House portfolio," or the index portfolios suggested in William J. Bernstein's "The Investor's Manifesto."
  • Remember that smart spending is as valuable as smart investing. Spend your income carefully. Every $1,000 not spent works like having an additional $25,000 in retirement savings, more if you consider taxes. Many retirees, for instance, have an opportunity for significant savings by replacing expensive prescription drugs with generics that will do the same thing. This is not a small opportunity. A little attention and research can help you save $300 a month, or more. If you are in the 15 percent tax bracket, you need $353 a month in pretax investment income, or $4,236 a year. The average balanced fund recently had a trailing yield of about 2.4 percent, so a single independent medical decision can "produce" the equivalent of income from $176,500 of investment assets.