How To Maximize Your Investments During Retirement

How To Maximize Your Investments During Retirement

March 06, 2023

Spring is the perfect time to take a fresh look at your finances and make some changes that can help you achieve your financial goals. 

American investors are worried about retirement. One survey recently revealed that 82% of those married and in their late 40s who had dependents were more afraid of outliving their money than they were of death.

Why the concern? People are living longer, so that money has to cover a longer period. Making matters worse, economic turmoil over the past three years has led to record-breaking inflation rates. On an individual level, the inflation rate affects how much your retirement dollars will really be worth. Over time, inflation can seriously devalue your savings and income.

Thankfully, there are many ways you can build your net worth and achieve financial freedom. Below, we'll explore some strategies you can use to grow your wealth this spring and beyond. 

So let's take a deep breath of fresh spring air and get started on the path to growing our wealth!

Understand Your Investment Goals

What does your ideal retirement look like? Retirement is a major achievement in an individual's life, signifying the conclusion of working years and the start of a new chapter. 

One of the most crucial aspects of retirement is maintaining your finances to ensure that you have adequate funds to cover your expenses for the rest of your life. To do this, many people turn to investments to help support them when they retire. 

Retirement goals and investment goals go hand-in-hand. Both are self-determined milestones on your journey to retirement. A successful retirement plan consists of at least the following key components:

  • Anticipated lifestyle

  • Expected retirement income, including but not limited to savings, pension and social security benefits

  • Risk tolerance if you choose to incorporate investing into your goals

  • Strategy for handling long-term care expenses, such as medical bills and fees associated with assisted living

To accomplish your goals, it is critical to maximize your investments during retirement. And one of the best strategies for doing so is to make sure you're investing for the long term rather than the short term. This is especially true if you choose to invest in the stock market. 

Do you want to create income, expand your assets, or both? Knowing your goals will assist you in selecting the appropriate investment approach and vehicles to achieve them.

Diversify Your Portfolio

Diversification is a crucial element of any investment strategy. It involves spreading your investments across different asset classes to minimize risk and maximize returns. As a retiree, you should prioritize diversification to protect your portfolio from market volatility and potential losses. A diversified portfolio should have a mix of different assets. Here are the most common types of investments:

  • Stocks
  • Bonds
  • Mutual funds
  • Exchange-traded funds (ETFs)
  • Real estate investment trusts (REITs)

Diversifying your portfolio across various asset classes can help you distribute risk and minimize the effect of a single asset's performance on your overall investment. This approach means that in case of poor performance of a particular asset class, the impact on your entire portfolio will be less severe. It's imperative to consult with a reliable and trustworthy Fiduciary advisor to determine the optimal asset allocation and diversification strategy for your individual financial situation.

Consider Income-Generating Investments

Investing in income-generating investments can provide a steady stream of income during retirement. These investments can help you cover your expenses and provide a source of regular income. Here's a look at some examples and how they differ from one another:

  • Bonds are fixed-income investments that pay interest at regular intervals. These can include corporate bonds, municipal bonds, and treasury bonds. They offer a reliable source of income and can help reduce portfolio risk.

  • Dividend-paying stocks provide shareholders with regular payouts in the form of dividends. Companies that have a history of paying dividends often continue to do so, making them a potentially stable source of income. However, dividend payouts are not guaranteed and can fluctuate based on the company's performance.

  • Annuities are financial products that provide guaranteed income payments over a certain period or for life. These are typically sold by insurance companies and offer a fixed income stream, making them a popular choice for retirees seeking predictable income. Please note, fixed annuities offer a guaranteed interest rate and protect the principal, making them a relatively safe investment option. However, variable annuities are linked to the performance of underlying investments and carry more risk.

  • Dollar-Cost Averaging requires the investor to invest the same amount of money in the same stock on a regular basis over time, regardless of the share price. The idea being when the share value rises, your money will buy fewer shares per dollar invested. When the share price is down, your money will get you more shares. Over time, the average cost per share you spend should compare quite favorably with the price you would have paid if you had tried to time it.

Investing in income-generating investments can help you cover your expenses during retirement and provide you with a steady stream of income. However, it's essential to work with a financial advisor to ensure that your investment strategy aligns with your retirement goals and risk tolerance. At Agemy Financial Strategies, we can help you select the right income-generating investments to meet your income needs and minimize the risk of running out of money in retirement.

Rebalance Your Portfolio

As you move into retirement, you should rebalance your portfolio to ensure that it aligns with your investment goals and risk tolerance. Rebalancing involves adjusting your asset allocation to maintain a consistent level of risk and return.

Part of the purpose of an asset allocation is to dilute the impact of each asset class by limiting both the upside and downside impact of the investments. But, when a particular investment grows in value faster than the other investments, you are exposed to more risk than you originally intended. Rebalancing your portfolio returns your investments to your original risk tolerance and reduces the risk that your portfolio will drop in value.

Maintaining ideal levels of risk and the correct asset allocation is a critical component of any long-term financial plan. Taking the time to rebalance your portfolio on a regular basis can help achieve both these goals.

Tax Strategies

Taxes are an aspect of retirement investing that every savings plan participant should understand. Five common types of taxes on investments include:

  • Tax on capital gains

  • Taxes on investments in a 401(k)

  • Tax on dividends

  • Tax on mutual funds

  • Tax on the sale of a house

While investing is a fantastic way to build wealth and security, it’s also a fantastic way to create a hefty bill if you don’t understand how and when the IRS imposes taxes on investments. Make sure you're accounting for these taxes in your investment strategy!

Consider Working With a Fiduciary Advisor

Managing your investments during retirement can be complicated, especially if you're not familiar with investing. Consider working with a Fiduciary Advisor who can help you develop a retirement investment plan.

At Agemy Financial Strategies, our Fiduciary advisors offer comprehensive retirement planning services to help you navigate the intricacies of investment management during retirement. With our expert guidance, you can choose the most suitable investment vehicles based on your retirement goals and risk tolerance, and establish a diversified portfolio that can generate steady income and protect your savings.

Let’s Talk Strategy

Making the most of your investments during retirement is crucial for securing financial stability in your later years. By identifying your investment goals and collaborating with a reliable Fiduciary Advisor, you can optimize your retirement investments.

Contact us today to set up your complimentary strategy session.