In my book “Cash-Rich Retirement”, I argue that it’s time to take a different, much less speculative approach to enlarging and protecting your nest egg. “It’s not over-valued condos or soon-to-correct stocks you need for retirement,” I write. “It’s real income and hard returns you can re-invest.”

Here are several tips from my book:

1. Diversify your holdings in radically different ways.

Forget all the mumbo-jumbo about splitting your investments between “large-cap value” or “small-cap growth” stocks. Over the long term, you are not likely to outperform the market investing that way. But you can produce better long-term results.

In Cash-Rich Retirement, I urge readers to diversify their investments on the basis of different income streams ¾ interest, dividend, and rent income. “Remember,” I write, “investments that produce real income tend to appreciate more when a market rises and sustain smaller losses when a market corrects.” And I survey research proving that you can, indeed, achieve substantially larger returns if you hold income-producing investments.

There is much less “loss propensity” with income-producing investments as well. During the 2002-2001 market correction, for example, stocks that did not pay dividends lost an average 30%. Ouch! Stocks that did pay dividends lost 13% instead ¾ and many continued to pay or actually increased their dividends.

Investing for income makes a lot of cents ¾ literally! That is why I recommend allocating your money on the basis of dividend, rent, and interest income. You want to broadly diversify your investments so they produce different income streams. You want to automatically re-invest that income. And you want to diversify broadly so that no single investment represents more than 10% of your total savings.

I also recommend putting up to 50% of your nest egg into non-U.S. holdings. It’s important to increase international holdings so that you capitalize on, rather than be penalized by, the remarkable demographic changes that are taking place.

2. Build your portfolio with income-focused funds, indexes, and REITs

There are many good mutual funds, indexes, ETFs [exchange traded funds] and REITs [or real estate investment trusts] that enable you to generate real income you can re-invest. My book names specific ones from Goldman Sachs, TIAA-CREF, Fidelity, WisdomTree, Oppenheimer and other top-notch groups.

A combination of these different pooled investments can help amplify the diversification of your portfolio. I also show that so-called “fundamental” indexes ¾ those that select and weight stocks on the basis of dividends or earnings or some factor other than price ¾ may “help investors avoid being top-heavy in overvalued stocks and achieve better results with lower risk.”

What if your 401(k) plan doesn’t offer these kinds of funds or indexes? “Let your employer know you want access to income-producing indexes and funds,” I answer. “Name specific ones. Get vocal. Speak up! Your future depends on it.” (And my book’s website provides model correspondence to help you request such additions.)

3. Get all the professional help you can!

Many investors hurt themselves by “trying to fly solo”. “In today’s world of complex tax rules, changing investment opportunities, and shrinking retirement benefits,” I write, “you need all the professional help you can get.”

I explain what credentials to look for in a financial planner. If you can’t afford a planner, I explain step by step how to use free on-line research, and recommend on-line educational tools that will likewise help you. You can also take the “Retirement Readiness Test” on my book’s website to judge whether your finances for retirement are on track.

4. Build income streams via a ladder of annuities.

As traditional pensions wither, it is increasingly each individual’s personal responsibility to ensure that he or she has adequate capital for retirement. That responsibility is very serious. So I explain how to make gradual investments in annuities ¾ starting with as little as $5,000 or $10,000 ¾ to build multiple income streams for yourself to meet your funding needs.

I specifically encourage readers to build a “ladder of annuities”, meaning layers of different annuities that provide different amounts of income during different phases of your retirement life. I explain the main kinds of annuities and what to look for when you shop for them. It’s all in layman’s language and you don’t have to be a millionaire to enact the advice.

These measures will help protect and enlarge your savings. I cite others in the step-by-step action plan I lay out in my book. I recommend speculation-adverse, more defensive ways of investing because I believe we are likely to experience even more investment turbulence in the years ahead. The country’s housing and credit crises, Boomer demographics, poor savings levels, high debt, and pension underfunding ¾ all make for a “perfect storm”. More than ever, each of us needs to save more, invest soberly, and get a lot more serious about protecting what we’ve amassed.

Consequently, my book makes the case for avoiding over-priced markets and correction losses by investing for real income and by using price/earnings ratios and rent information to judge when a market is “red hot” and ripe for correction. I explain how you can look at the earnings you get from an investment to judge when a market (or stock or fund) is overpriced and may be poised for a price tumble. And I explain reverse mortgages and health insurance in detail, showing when they are (and are not) suitable ways of protecting your savings or generating cash.

Our grandparents might have enjoyed a pension, a gold watch, and the fall-back of home equity when they retired. Today, most of us have to amass and protect adequate savings on our own. “Don’t count on home equity as your sole source of retirement income,” I advise. “Save more. Get back to income fundamentals. And use income investing, insurance and annuities to safeguard your financial future.”

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