Investing does not end once you reach retirement. However, your priorities will most likely change, such as wanting more liquidity and stability to allow you to meet needs and still be able to relax in retirement.
Exact advice will always vary depending on your needs and priorities. If you’ve just retired or are approaching this point, now is an ideal time to make an appointment with your financial advisor to check the fundamentals and optimize your portfolio as you move forward.
Below are three strategies to both guide that discussion and to keep in mind in the months and years ahead.
Strategy 1: Have a plan for what you’ll do during retirement.
It’s our hope that great fulfillment is ahead of you, whether that’s an advisory or nonprofit role, traveling the world, or spending more quality time with loved ones. The possibilities are endless. But knowing what you’re planning on doing will help shape the strategy for utilizing your financial resources.
For instance, which investment accounts should you start withdrawals to supplement retirement income and how much? I would not recommend initiating withdrawals from investment accounts without a multi-year plan. What it truly means is having the right guardrails in place to balance what you want to do with maximizing the resources you have at your disposal.
Speak to your financial advisor if you either haven’t thought a lot about planned withdrawals or are having doubts about the original plan you drew up.
Strategy 2: Choose strong sources for retirement income.
Strong – and tax-efficient – sources of income can make your retirement experience more seamless. For example, dividends from stocks and stock funds have declined in recent years due to the increased popularity (and inherent tax efficiency) of corporate stock buyback programs. In turn, investors have reached for high dividend stocks that may increase portfolio risks and sector/industry concentrations. There should be care put into what type of dividend yield a portfolio can produce for volatility in value.
With interest rates rising across the board in 2022, there are also better opportunities to find income in debt securities, whether it’s corporate bonds, U.S. Treasuries, or private debt. An overall, consistent portfolio yield can help supplement (if not entirely cover in some scenarios) retirement withdrawals.
Strategy 3: Ensure your assets are sufficiently diversified.
During retirement, you may want to ensure a greater level of safety and flexibility in your portfolio, as opposed to the larger amount of risk that may have characterized earlier investment periods.
Consider revisiting your target investment asset allocation and even creating an investment policy statement. Nobel prize laureate Harry Markowitz famously said that diversification is the only free lunch in investing. Diversification across asset classes including stocks, bonds, real estate, and cash can help to draw out the value of your investments more while keeping risk under control.
Find time to reexamine your exact tolerance for risk, which may have changed. At RBG Wealth Advisors, our Risk Number calculator will help you visualize the level you want, how much you currently have in your portfolio, and how much you need to take to reach your goals. This can guide the adjustments you want to make, so that you have a better sense of what to expect moving forward.
Besides many years of good memories ahead, hopefully meeting you there is a robust and balanced retirement portfolio that will allow you to live them to the fullest.
Our goal at RBG Wealth Advisors is to ensure your investment portfolios meet financial planning needs, while also maximizing efficiency. If you’re interested in learning more about how we might be able to help you achieve your goals, reach out today for a consultation.