Investing During Retirement

If you’re investing during retirement, you’ll likely be placing a premium on immediate income generation. Investing during retirement doesn’t provide you with the same luxury of time or alternative income sources like pre-retirement investing. This means that the investments themselves must yield consistent income.

Suppose you’re retired or will retire soon. In that case, you also have many other things to consider in your retirement plan, such as passing on value to future generations, estate planning, and how much you can safely withdraw each year without compromising your portfolio.

This guide will help you clarify your plans and realize your goals.

Consider these strategies: 

1. Today’s dollar will not be worth the same as a dollar tomorrow. Inflation has shown to be a game-changer in the economy for the past several decades, and this trend shows no sign of slowing down. 

• It’s important to consider including some medium-risk investments in your portfolio to help offset the effects of inflation. Having too conservative of a portfolio could mean that your yearly earnings will lag behind the inflation rate. 

2. How much can you withdraw? This may be one of the single most confusing areas for retirees. Often individuals approaching retirement may plan on withdrawal rates as high as 10%. 

• A more realistic number is 3% to 5%. By opting for a lower asset withdrawal rate, you’ll be able to help ensure that you don’t outlive your retirement savings. 

3. Costs, fees, and penalties. Some companies may offer attractive-sounding fee percentages at just one or two percent. However, these fees can amount to thousands of dollars in lost earnings in some situations. 

• Additionally, some savings have fees and penalties associated with early withdrawals, which can cost you a pretty penny. Depending on the type of account, the fees can be as high as 35%! 

• Before you invest, find out all the fees you may incur, including any for early withdrawal. Ask when would be the earliest date you could withdraw without extra costs. Then determine if this date fits your needs. 

• Ensuring that you understand the fees associated with your accounts can save you a considerable amount of money. 

4. Work with an advisor. It may be possible to do it all yourself, yet chances are you could benefit from the added experience that a trusted financial advisor brings to the table. This is not the same as working with a broker, which could cost you additional unnecessary fees. 

• A financial advisor can help you navigate your retirement investing with ease. An advisor can also help you develop a withdrawal strategy that is both tax-efficient and helps minimize penalties or avoid them altogether.

Investing during retirement may seem intimidating, yet it pays to be innovative. Being aware of potential pitfalls puts you in a better position than most people, who base their whole retirement plans on pretenses and inaccurate assumptions.

Whether you’re currently retired or planning, it’s never too late to begin taking steps to maximize your earnings when investing during retirement.