What Should Investing Look Like After You Retire?
Like many, during your working years, you’ve labored tirelessly to develop a retirement strategy that would allow you to retire comfortably, and without any worries for the future.
As you’ve accrued wealth for your retirement, investments have probably played a key role in the process, and they will likely continue be an important aspect of your retirement as a source of supplementary income, sustaining and even growing your wealth. But you should be mindful of how you invest after retirement.
While you were working, you had one big investing advantage: a steady paycheck. Even if you were to incur significant financial losses, your paycheck could provide a safety net and the opportunity to replenish your wealth. Once you retire, it may be wiser for you to consider adopting a more conservative investing approach. In retirement, your primary investment priority should be protecting and sustaining your wealth. So what does a conservative investment approach look like?
First and foremost, a conservative investment strategy is a defensive one.
Before making any decisive investment moves after retirement, be sure that you’ve got an emergency fund (to cover a minimum of three months of expenses) set aside in case an unforeseen medical emergency should occur or the economy experiences a recession. Once that money is set aside (and easily accessible), you’re ready to explore investment options for your retirement.
As I mentioned earlier, retirement is not the time to gamble your wealth in any high-risk investments. If you lose big, then you likely won’t have the earning potential to restore your losses, which could put you in big financial trouble. Instead consider investment options that are known for their stability and consistent returns: treasury bonds and CDs could be a possible investment option. Though these options aren’t known for their extravagant returns, they are safer bets and better than losing money on a higher-risk investment.
Should you retain your pre-retirement investments, watch the markets that you are invested in meticulously.
The ‘buy-and-hold’ strategy won’t necessarily play in your favor after you retire. A more defensive investment strategy requires that you play a more active and conscientious role in your investments. If the markets you are invested in begin to decline, consider withdrawing your investment capital before you sustain significant losses and moving it to more profitable markets. A defensive investment approach is constantly being adjusted and reoriented to optimize returns while minimizing risk.
Annuities might be another route to consider.
As I’ve mentioned before, I’m not always partial to annuities, but I do think that a specific type of annuity that allows you control over and quick access to your funds can be a wise investment move after retirement. If you’ve become accustomed to the routine of receiving a regular paycheck from your work, annuities can provide a similar sense of security through consistent payouts.
As always, if you have any questions about how you should alter your investment strategy after retirement, please consider consulting with your financial advisor, who will be able to provide you with a clearer overview of your finances in retirement and help you assess your risk tolerance for post-retirement investing.