Retirement planning has undergone a radical change in the last decade. Times have changed and so has the way people are thinking about retirement.

Before 2008 many financial planners talked to their clients about buying a vineyard or opening a New England bed and breakfast in their golden years. After all, stocks would continue to gain in value and so would the equity in their home.

Then came the reality check of 2008. Now, it seems, the goal is to just have enough money to live the rest of your life above the poverty line.

Doubts about pensions and Social Security

In the past, many could rely on pension plans and Social Security benefits, but pension plans are increasingly rare and Social Security benefits should not be used as a sole source of retirement, financial planners now say.

Problem number one is Americans are living longer. Not really a problem except that if you stop working at age 65 and live to be 95, there's 30 years of living expenses you have to cover.

According to a recent Employee Benefit Research Institute study (EBRI), nearly 47 percent of early baby boomers, ages 56 to 62, are at risk of outliving their retirement savings. To make sure that doesn't happen requires a plan. A realistic plan.

A realistic plan

"To develop a sustainable strategy that meets your specific needs, some important considerations would be your age at retirement, life expectancy, living expenses and the rate of return you expect from your investments," said Dean Urbanski, Vice President, BMO Harris Financial Advisors, Inc.

A realistic retirement should include these steps:

• Reduce living expenses
• Develop a withdrawal strategy
• Carefully allocate your assets
• Choose a post-retirement career
• Improve your health

While most planners begin their strategy on the income side, it may be best to look first at the expense side and housing is one of the biggest expenses. If your home is nearly paid for, step up efforts to pay it off early.

If you still have a large mortgage consider downsizing. If you have equity in a home consider selling it, now that the housing market is beginning to recover, and relocating to an area where the cost of living is less. Living without a mortgage is an excellent way to make your retirement funds go further.

Withdrawal strategy

If you have retirement savings, you must come up with a withdrawal strategy. Knowing how much money should be withdrawn from your retirement savings each year is a critical factor in building a retirement plan.

Withdraw too much and you are likely to outlive your assets; take too little and you may unnecessarily sacrifice your standard of living, especially in the early years of retirement.

Asset allocation

Asset Allocation is another important consideration. As individuals seek increased income in retirement, they often shift their holdings more toward bonds and cash. This may or may not be a good move, as there are other key investment considerations beyond having a need for income. Confer with your financial advisor to determine the appropriate allocation for your needs, investment objective, risk profile and time frame.

If possible, your retirement assets should keep working, providing an income stream. This income can be used to meet your day-to-day expenses.

One possible option is to allocate a portion of your savings to an annuity. Annuities are an investment tool that can provide guaranteed income for the rest of your life, no matter how long you live.

While not guaranteed, another source of income are stocks that pay dividends. While many retirement people shy away from equities, a diversified portfolio of income producing stocks and funds reduces some of the risk while providing steady cash flow.

Have a plan

"Whatever your specific plans, it's crucial that you enter retirement with a strategy for turning your savings into a retirement 'paycheck' that will allow you to live retirement on your own terms," Urbanksi said.

In addition to the “paycheck” you receive from your retirement savings, consider an actual paycheck from a full or part-time job. In other words, just because you retire doesn't mean you have to stop working.

Many people, however, can't wait to retire. The last thing they want to do is consider another job. But consider this: most people don't hate work, they just hate their jobs. What if you could find a job doing something that actually gives you pleasure, even at a reduced paycheck? The income from that job would supplement the income from your investments, pension and Social Security.

Finally, remaining in good health during retirement will have a major positive economic effect. Staying active in both mind and body will help you be more productive and, should you choose to, work longer.

Story provided by ConsumerAffairs.