Welcome to the latest edition of Fiscal Fitness! As we head into 2012, I reflect on the things that took place in 2011 and think, would things have been different had we done better planning?

On top of that, continued market volatility, inflation, rising health-care costs and concerns about the future of social security. All the same concerns we had in the past still continue today and factor heavily when we think about planning for our future.

Most people I meet underestimate the amount of income required to fund a retirement that could last 20 to 30 years! According to annuity mortality tables, a healthy 65 year-old female has a 50% chance of living until age 88 or 23 years into retirement! For a married couple, at least one of you has a 25% chance of living until age 97! For the ladies who read my column, you have even more challenges - greater longevity, statistically lower earnings which mean less money going into retirement plans and social security, among other things. With company pensions slowly going away, the challenge for all of us is creating an income stream during our golden years we can't outlive!

The inflation rate varies from year to year, but since 1926 it has averaged 3.1% a year. The cost of healthcare insurance and healthcare in general is rising faster than inflation. What about the cost of long-term care? About half of all Americans will need long-term care services at some point in their lives, and the number is much higher for women. Generally, Medicare pays only a very small part of long-term care expenses-and only under restricted circumstances. With longer longevity, it's no surprise to find that nearly three out of four of nursing home residents are women, according to AARP Public Policy Institute. You need to know what Medicaid and Medicare doesn't pay for and plan accordingly.

Interest rates are at historical lows. If you are keeping your money in cash, after inflation and taxes, what is your real rate of return? Negative? How will you keep pace with rising healthcare costs? How can you insure your retirement income keeps pace? With traditional pensions going away, many people are taking a fresh look at annuities to supplement their income. According to a recent article in Barrons ¹, there are over 1,600 iterations of the product available, enough to make your head spin! It's no wonder people contemplating retirement are confused about funding their retirement.

What a year! The S&P500 Index eked out a total return gain of 2.1% (including the impact of reinvested dividends), but not with some volatility along the way. Missing just the 3 best percentage gain days last year, your gain falls to over a 10% loss. Like dominoes, return sequence, or the order in which your investment's returns occur, can have a dramatic impact on your retirement income. More importantly, on its ability to last. Will the markets cooperate when it's time for your first withdrawal? What can you do to minimize those unexpected risks?

¹ June 20, 2011, Barrons Online Best Annuities