Retirement investments are usually divided into "taxable" and "tax deferred" buckets.

The typical recommendation is to "max out" your tax deferred contributions before making taxable investments. Most investors are aware of the benefits of diversification in their quest to improve returns while reducing risk. Few have considered diversifying their post retirement investments on a tax basis to reduce potential tax hits after retirement. Previously there were few opportunities to diversify investments based on tax impacts - now there are new options.

In this day and age of few defined benefit pension plans and a lot of questions about the solvency of our nation's social security system, we all face the challenge of saving enough to support ourselves during our non-working years.

Those of us, including yours truly, who work for themselves, have the additional responsibility of starting a tax friendly retirement savings plan for themselves. Fortunately, there are a number of plan options available to the self-employed. I will limit our discussion to those who are self-employed and do not currently have any employees.

With the lure of tax-free distributions, Roth IRAs have become popular retirement savings vehicles since their introduction in 1998.

However, if you're a high-income taxpayer, chances are you haven't been able to participate in the Roth revolution. The good news, that's about to change.

What are the current rules?

There are currently three ways to fund a Roth IRA - you can contribute directly, you can convert all or part of a Traditional IRA to a Roth IRA, or you can roll funds over from an eligible employer retirement plan.

Inflation has been calm for the last 10 years. The CPI has averaged only 2.4% on an annual basis. This is significantly lower than the 3.4% for the previous 20 years. However, even low rates of inflation erode your purchasing power. At 2.4%, your purchasing power is cut in half in 30 years. If you are relying on a fixed pension, you will see a significant change over your retirement lifetime.

Periods with low inflation rates also tend to mean low interest rates on investments such as savings accounts, money markets and CDs. If you own these investments, and are earning between 0.1% and 1.25% annually, you are losing purchasing power, even at today's low inflation rate.

To avoid losing ground, you may need to alter part of our investments to assure you are at least keeping pace with inflation. This can be done by moving a small portion of your assets to higher return/higher risk investments. Choosing the right investment can reduce your inflation rate risk while not increasing other risks such as volatility, liquidity or business.

What is an immediate annuity?

While there are many variations of immediate annuities, the basic terms are simple: you give a single lump sum of money to the annuity issuer (an insurance company) which pays you an income for the rest of your life. Immediate annuities are appealing if you want a guaranteed income you cannot outlive.

An immediate annuity can shift longevity risk and inflation risk from the investor. The risks of losing a portion of your investment due to early death or failure of the annuity issuer (insurance company) still remain. Options, which address some of these concerns, include; receiving income for a set period of time, for the joint lives of you and another or income that adjusts to compensate for inflation.

Just as the second half of a game is more important to winning than the first, getting income planning right in retirement is critical to success.

Similar to preparing for an important game, you need to prepare for retirement by adapting the best strategy for your circumstances. Here are some thoughts to keep in mind when reviewing your current or future retirement income planning. Most people will need the assistance of a qualified financial planner to assist them in developing a comprehensive plan.

Add retirement to the long list of things Baby Boomers are changing their minds about.

An April, 2006 study by Zogby International and the MetLife Mature Market Institute found that a significant number of older Americans are revising their ideas about their post-career years. The study found that 78 percent of respondents aged 55-59 are working or looking for work, as are 60 percent of 60-65 year-olds and 37 percent of 66-70 year-olds. Across all three age groups, roughly 15 percent of workers have actually accepted retirement benefits from a previous employer, and then chose to return to work (or are seeking work). Called the "working retired," these workers represent 11 percent of 55-59 year-olds, 16 percent of 60-65 year-olds and 19 percent of 66-70 year-olds.