Investing After Retirement Must Consider These Realities

Investing after retirement can be successful if you focus on the investments that make the most for your life while avoiding extra risk


Investing after retirement

Risk is a given when it comes to investments, but it doesn’t need to be an uncontrolled risk. That’s an especially important factor when you’re investing after retirement. With appropriate planning, you can create a structured plan that will put you and your family in the best position moving into retirement.

Don’t take that the wrong way, though. Every investment doesn’t need to be hyper-conservative, and, in some cases, it probably shouldn’t. Still, gauging your risk temperament and seeking advice on what your money can do for you will be valuable in helping you make the best decision for your investments.

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Consider your risk aversion when you’re investing after retirement 

Whether you’re working with a professional advisor or planning to manage your investments, you have to evaluate your risk tolerance. Even if you’ve done this before, the way you feel about risk can change as you head into retirement.

Clarifying your risk temperament will make your present and future investment decisions easier. People who don’t do this either have to spend more time thinking about every investment, or they go into investments blind about how it fits into their plan.

Evaluating your risk tolerance is the first step to building a plan and portfolio that suits your needs.

Don’t overlook the impact of inflation

Advisors regularly see people ignore the consequences of inflation. An investor may say something like, “I won’t be able to live luxuriously, but I think I’ll be able to get by with my current savings.”

A gut feeling that you can get by isn’t a great way to operate with finances. You need to know what your plan is and how it accounts for different circumstances. If you don’t, you’re setting yourself up in a vulnerable position in the future.

Inflation is the most significant unknown factor in retirement. Forecasters will say they know precisely how inflation will hit, but that’s not always the case. Look at your money and put it through different stress tests of specific rates of inflation. Then you’ll be able to make a plan for different scenarios and circumstances. This makes it less likely that a surprise will catch you off guard. 

Focus on your needs when you’re investing after retirement

Too often, retirees are pitched the same investment strategy of preserving their wealth. That might not be what you are trying to do, and it may not be in your best interest. Of course, the primary goal of investing is not to lose money. Still, there has to be a larger focus on your needs.

When talking to an individual, their needs will probably include their family members, plans for the future, and how they want their lifestyle to look in retirement. But that is only the beginning. Each investor needs to consider a great deal, especially if they will be removing an income stream through retirement.

Investing after retirement can be easier with help from an advisor

The best advisors are replete with tools to make planning easier. They also have access to sophisticated financial vehicles that can help ensure your money will last and give you the lifestyle you’re searching for.

If possible, it’s best to work with a fee-based fiduciary advisor, since they are legally obligated to do what is best for you. They also won’t be incentivized by commissions because of their fee-based income.

A fiduciary is not always practical for everyone, but if you can find one, do your best to work with them. Otherwise, finding someone you have trust and faith in is your best solution.

Conservative investing after retirement can focus on CDs, investment-grade bonds, and fixed annuities

While we stated that hyper-conservative investing and wealth preservation isn’t for everyone in retirement, there is a likelihood that this will at least be a small part of your plan. Certificates of deposits, investment-grade bonds, and fixed annuities are great vehicles to make up the safer portion of your investing.

These will give you a strong floor that you can be confident won’t go away. Beyond that, you can get as aggressive as you feel is appropriate so that you can get more growth in your retirement years.

Also, be aware of where you are taking money for your living expenses. If you take all the money for expenses from these safe accounts, that means your investments are steadily leaning towards more risk. Be prepared to rebalance your portfolio once you’ve taken money from individual accounts or gained in others.

What do you think is the proper balance of investments for you in retirement? Why do you feel this way?

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