Laid off and making the retirement savings last

(MONEY Magazine) -- We spoke to five families who face challenges that could keep them from meeting their financial goals. With a few tweaks to their game plan, they can get back on course. Here, the Parkers' story -- and the recommended financial fixes.

Ed Parker never planned on retiring early. But in 2009, at age 61, he was laid off from his job as a manager at a Caterpillar dealership and realized he was ready to end full-time work. His wife, Roxann, had retired a decade earlier from her job at a department store, and travel plans beckoned.

To stay busy, Ed volunteered at a local hospital and was offered a part-time job, which gives him an income of $900 a month. The Parkers live in an inexpensive area, and pay only $265 a month for their mortgage. That habit, plus Ed's income, his severance package, and taking Social Security at 62, meant that the couple haven't had to tap their retirement savings.

Now that the severance package is finished, financial worries are creeping in. They aren't sure how much they can afford to withdraw from their savings each year ($455,000 in two traditional IRAs and $47,000 in a brokerage account), when Roxann should take Social Security and whether they can still afford luxuries like a trip to the West Indies. "We just want to make sure we're doing the right thing," says Ed.

Their finances

• Their income: $30,000
• Assets: $503,000 in retirement savings, $82,000 in home equity, $13,500 cash
• Goals: Make retirement savings last; travel

The problem

Though the Parkers live simply, not having a coherent plan for making withdrawals risks over-spending. "It's important to get this right now," says financial planner Michele Clark of Chesterfield, Mo., "because the first few years of withdrawals have the biggest impact on the portfolio."

The good news is that their 60%-stock/40%-bond mix is right on target, but too big a chunk in intermediate-term bonds leaves them vulnerable to a big drop if interest rates rise.

The advice

Create a spending plan. At Clark's request, the Parkers came up with a detailed budget for 2012: $45,200 for living expenses. Subtracting Ed's post-tax Social Security payment ($19,143) and salary ($10,800) means they will need to withdraw $15,252 from investment accounts.

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That's less than 3% of their portfolio -- well under the 4% most planners suggest -- but other expenses are on the horizon: They would like to take that trip to the West Indies soon ($5,000) and within four years will need a new car and camper trailer.

Tap taxable accounts first. Cash out the brokerage account and let the IRAs continue to grow tax-deferred, says Clark. The Parkers should keep the next year's withdrawals in cash and the funds for the following two years in one- and two-year CDs.

They can fund the West Indies trip by dipping into their $13,500 cash savings, since their expenses are low. "That's a relief," says Ed. "The trip seemed like a huge splurge."

Diversify the bonds. The Parkers' fixed-income allocation (38%) was nearly all in intermediate-term bonds. Cutting that to 20%, adding 15% of short-term bonds, and bumping up cash holdings from 3% to 5% should reduce volatility.

Take Social Security early. The rule of thumb is to delay taking Social Security as long as possible, but with more than $30,000 in expenses coming up for a new car and camper, Roxann should take it when she qualifies, says Clark. Otherwise, they would start depleting their retirement accounts too soon.

Assuming they follow that plan, the Parkers have a greater than 80% chance that their funds will last them into their early nineties, says Clark. Sounds good, says Ed: "Now we don't have to worry anymore."

MONEY magazine is researching an article on ways to reduce the financial pain of college. We're looking for families that can talk about new and creative ways that they're raising cash for college and cutting costs while they're there. Sound like you? Tell us your story and you might even get your picture in the magazine! E-mail Beth_Braverman@moneymail.com