Once you reach retirement, your responsibility as an investor changes. Understanding the way it changes and how to adapt your point of view is vital for the success of your retirement finances. What changes should you make after triggering your retirement? Here are a few key differences you'll need to adjust to.
1. Stability Is More Important
When you were building up a retirement savings, your focus was probably on growth. To achieve that desired growth, not only have you socked away money but you've also chosen riskier investments. But now, that risk is more of a danger rather than a useful feature.
As you approach retirement, you and your financial advisor usually work to reduce exposure to riskier investments and speculation. You have less time to make up for losses if continuing to work is no longer an option. Reducing risk often means avoiding the exciting plays of stock market investing, seeking better yields, and thoroughly vetting investments. A good advisor will be important during this transitional time.
2. You Now Have Two Timelines
Most retirees now have two competing timelines to worry about. The first is the next few years, during which your portfolio has less room for loss. The second timeline is the future when your focus is on not running out of money. Managing these two competing priorities takes a multi-part strategy.
Your first timeline, the next few years, should be about covering necessary expenses no matter what the economy brings. This may also be a time when you want to enjoy the things that you may not have been able to when working. The second timeline, though, is important as it must continue to show some growth — at least to counteract inflation. The right mix is unique to each retiree.
3. You May Want to Simplify
Simplification and downsizing aren't just terms for your physical home or lifestyle. They are common components of retirement investments too.
When building your assets for retirement, alongside other forms of investing for other purposes, your portfolio probably grew to include many types of investments and income. Many retirees end up with multiple IRA accounts (as well as both traditional and Roth IRAs), pensions, life insurance policies, brokerage firms, bank accounts, and sources of passive or active income.
When all these vehicles are geared toward growth, this complexity may not be a big issue. But when you need to start drawing on your assets and relying on monthly checks as income, simpler could be better. It helps you understand what you have to work with, makes estate planning easier, and reduces the risk of fraudulent activity.
4. End-of-Life Planning Gains Focus
You've had one primary goal: providing the best retirement you can. But your plans should now alter to pay more attention to what happens when retirement is over and you pass away. While this is a subject few people like to talk about, it is more important than ever. Aging is an inevitable part of retirement, but that also means you can plan for it.
Even if you've put a will in place or have reevaluated it in the past, do so again after retirement. Why? First, you now have a more accurate picture of your post-working finances. You may also have fewer responsibilities now and want to increase your plans for a legacy. And you should ensure you have modern, legal documents in place if you're incapacitated.
Retirement is the culmination of many years of hard work on your part. But it is the start of a new chapter with new goals and features. When you approach it with a fresh perspective, you will be able to craft the most successful chapter possible. Want help? Presidio Wealth Management can assist no matter what your retirement plans. Make an appointment today with a finance pro and get started.