Investing During Retirement

Smart strategies for retirees

05/18/2017

Investing During Retirement

There is more at stake when you are investing during retirement because you no longer have an income that can make up for potential losses. During your working years, you could make up for investment setbacks by adding extra hours to your work schedule or postponing retirement. But going back to work is typically not an option for retirees, so caution is needed.
 
In addition to caution, retirees can often benefit from working with a professional and not undertaking all their investing decisions themselves, lessening the chance of making a mistake due to inexperience.
 
Making your retirement funds last means finding a sustainable yearly withdrawal rate. Although no two retirees’ situations are exactly the same — so no guidelines can be taken as guarantees — there are still a few general guidelines that many financial experts recommend. One such guideline is to withdraw 4 percent in your first year of retirement, and then adjust that amount based on inflation thereafter.
 
“This standard was originally published in a 1994 paper by William Bengen, who concluded that a 4 percent withdrawal rate in year one of retirement is safe assuming a 30-year time period,” reports Forbes contributor Rob Berger in a guide to investing in retirement published in June 2016. “The 1998 Trinity Study, so named because its three authors were professors at Trinity University, confirmed these results.”
 
Although that advice originated in the 90s (with the Trinity University study updated in 2011), it is still frequently touted by industry professionals.
 
“Such a withdrawal rate is unlikely to deplete your savings over a 30-year retirement,” states Kiplinger Personal Finance Contributing Editor Kathy Kristof. “All you need to do is review your investments and determine whether your portfolio properly balances your need for safety, growth and income in a way that will keep you both physically and emotionally comfortable.”
 
Finding the perfect mix of investments that achieve these goals might take time, particularly as retirees should exercise extra caution without the added safety net of their working income. If your retirement funds are spread out over many accounts or you want to drastically change your portfolio right away, you might need a higher degree of professional help than those whose investments currently meet their financial goals and who only need to ensure they continue to perform. Please let us help, learn more here.

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