2019 – 5 Investing Tips for Retirees

A retirement investment strategy will aid the longevity of your financial portfolio

Last year, roughly 43.7 million retirees received Social Security benefits, according to Statistica. While the average Social Security benefit is $1,461 per month, the average living retiree left full-time work at age 60. So, considering the minimum age to collect the benefits is 62, retirees need to manage their investments and ensure that they’ll last.

2019 – 5 Investing Tips for Retirees
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With Americans living well into their mid-eighties, smart retirement investing can mean the difference between financial success and failure.

Here’s how investors can maximize their investment income to supplement Social Security and secure their financial future.

Consolidate Your Investment Accounts

Whether you’re already retired or facing the new lifestyle soon, it’s smart to roll over old 401(k) accounts into an existing (or new) IRA. This gives you control of the assets and the flexibility to invest in what you want, not what’s offered by the plan.

If you have multiple savings, checking or investment accounts, consolidate all like accounts into one. In retirement, you typically prefer a simpler life. That means, one checking, savings, investment and retirement account, if possible.

Consider Your Investment Portfolio Holistically

Analyze your investments as if they were in one bucket. Asset allocation decisions are extremely important and affect your future returns along with your ability to stay the course during markets gyrations. Tally up the percentage in stocks, bonds and cash investments.

Use an asset allocation calculator or talk with a financial advisor about the right asset mix for your temperament and portfolio value.

Early retirees typically need a large cash cushion to get them through several years of retirement. If markets decline during the first years as a retiree, you don’t want to be forced to sell investments during a losing year.

Examine Your Investment Expenses

Many investors are unaware of the fees they’re paying on their investment accounts. It’s not unusual for unsuspecting investors to pay a 1.5% portfolio management fee to an adviser and to own funds that charge over a 1% management expense ratio. Add these figures up and you’re paying close to 3% for investment management.

If your investments earn 6% one year, you’re yielding 3 percent. And, if these funds are held in a taxable account, you’ll be luck to walk away with a 2 percent return, after taxes.

If you discover that you’re paying more than 1% for fund management and expenses, consider investing in a robo-adviser for retirees. Betterment and Personal Capital both offer well-respected digital investment managers with financial advisers, low fee funds and professional investment management. While United Income is a robo-adviser designed specifically for retirees with extra services that help with Social Security and Medicare planning.

Invest in a Retirement Income Fund for Monthly Cash Flow

Vanguard, Schwab, Fidelity and John Hancock all offer retirement income funds. The overriding objective of these funds is to diversify the holdings and pay out a regular income stream.

Each company has a distinct take on this concept, but most fund management fees are lower than 1% and provide investments in diversified stock and bond funds.

The Vanguard Managed Payout Fund (NASDAQ:VPGDX) offers a calculator to guide your monthly payments. Depending on your inputs, a portion of your payout could include return of principal.

Schwab’s Monthly Income Fund series include three funds worth considering: Schwab Monthly Income Fund – Moderate Payout (NASDAQ:SWJRX); Schwab Monthly Income Fund – Enhanced Payout (NASDAQ:SWKRX); and, Schwab Monthly Income Fund – Maximum Payout (NASDAQ:SWLRX).

Fidelity’s income replacement funds are designed to be depleted at a specific future time. Thus, for investors desiring to leave a legacy, the depletion date should be set far into the future.

Meanwhile, John Hancock’s retirement income fund charges more than 1% to manage, and so might not be the most economical retirement fund choice.

Increase Equity Percentages as you Age

Reverse glide path strategy research found that increasing equity exposure over the retirement years can lead to higher overall investment returns.

This means that as investors age, they should consider increasing their allocation to equities. This has been shown to maximize total lifetime income. For this approach to succeed, investors are advised to keep at least three years’ worth of cash and high-quality fixed income investments available for living expenses. Next, they should have another bucket of intermediate and short-term fixed income assets for intermediate — three to seven years — expenses.

The remaining assets can be invested in stocks, to grow and support long-term spending needs.

Smart retirement planning and investing can help simplify financial management. Ultimately, having a retirement investment strategy will aid the longevity of your financial portfolio.

Barbara A. Friedberg, MBA, MS is a veteran portfolio manager, expert investor, and former university finance instructor. She is editor/author of Personal Finance; An Encyclopedia of Modern Money Management and two additional money books. She is CEO of Robo-Advisor Pros.com , a robo-advisor review and information website. Additionally, Friedberg is publisher of the well-regarded investment website Barbara Friedberg Personal Finance.com . Follow her on twitter @barbfriedberg and @roboadvisorpros. As of this writing, she does not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, https://investorplace.com/2019/03/2019-5-investing-tips-for-retirees/.

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