Saving for retirement is challenging, no doubt. But if you want to know what's really tricky, consider spending that money in retirement.
Retirees in the past often relied on a simple rule for retirement income: Draw down 4 percent of your savings every year and you will be all set. But the retirement landscape has changed.
Low interest rates also complicate the picture for savers. A one-year certificate of deposit came with a yield of just 0.28 percent, on average, through most of September, according to Bankrate. That's hardly enough to generate much retirement income.
Then there is the changing nature of retirement saving itself. Many people retiring now are able to count on pension and Social Security payments for the bulk of their retirement income, with investment income the icing on the cake. An AARP Public Policy Institute analysis of Census Bureau data found that in 2012, median income from Social Security for those receiving it was $13,972, and median income from pensions and retirement savings was $12,000. For these people, drawdown decisions matter, but represent just a portion of retirement income.
But as more and more people retire without defined benefit plans, their own savings, often in 401(k) accounts, will be increasingly important — and investors' choices about how to use them will be more complex.
"You need to have the safety in terms of predictable income, and you need to have part of your portfolio in risk assets. You could be looking at 30 years" of retirement, said Dan Keady, senior director of financial planning at TIAA-CREF.