Until now, your strategy has probably been focused on accumulating as much money as possible. Now that you’re retiring, you’ll need to rethink how you manage your assets.
You may be withdrawing money from your retirement accounts, rather than accumulating, so you may need to reallocate some of your assets to investments designed to meet your short-term needs. But some of your needs are still very long-term, maybe 20 years or more, so a long-term investment approach may still be warranted.
It’s not unusual for retirees to become risk averse. Without a steady income from a job, they worry that their nest egg will erode unexpectedly, and they react by seeking very low-risk investments. Before you change the overall mix of your portfolio, remember that your goal during retirement is to maintain your financial independence for your entire lifetime. This means you need to think about how longevity, the market, and inflation could impact your portfolio.
Many financial professionals suggest that you plan to maintain 100% of your current costs, or more. Some retirees will actually need more money because they plan to travel, play extra rounds of golf or participate in other expensive recreation. Also, keep in mind the escalating costs of health care.
The choice is personal, but you’ll most likely need a budget to keep from spending too much of your accumulated wealth too quickly.
If you determine that your retirement income will not support the lifestyle you have chosen, you may need to make some adjustments. Many retirees plan to supplement their retirement incomes by working part time or turning a hobby into a small business. If your nest egg appears to be a little short, the best time to find out is when you still have time to add supplemental income or even decide to work full time for an additional five years to help provide a budget cushion.
It is important to review your investment strategy. Although some investors, especially those nearing retirement, still haven’t recovered emotionally or financially from 2008, it is important to not be too risk-averse. With most retirees facing 20 years or more in retirement it is critical to be properly diversified. One mistake retirees often make is holding too much cash. Although it is always important to have liquid assets as part of a well diversified portfolio, holding too much cash, earning little or no interest, can be detrimental. It is important for retired couples to review their portfolios with an investment professional that can make sure their retirement portfolio is not only diversified and allocated properly, but their investment strategy is consistent with their goals, risk tolerance and time horizon.
Mintco Financial Team: Our mission is to make professional financial advice and investment services accessible to everyone. We believe that by putting our clients first, explaining complex financial topics in easy to understand language, and helping those in need, we can achieve that goal. Call us for a complimentary meeting to review your financial planning at 716 565 1300 if you are in NY or if you are in Florida 813 964 7100.
Email is info@mintcofinancialcom
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