6 Investment Tips That Can Reduce Worry in Retirement
To do all the things you’ve dreamed of in retirement and not stress that your money will run out, you need to make the most of what you have with a smart, integrated investment, income and tax plan.
You are now subscribed
Your newsletter sign-up was successful
Want to add more newsletters?
Delivered daily
Kiplinger Today
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more delivered daily. Smart money moves start here.
Sent five days a week
Kiplinger A Step Ahead
Get practical help to make better financial decisions in your everyday life, from spending to savings on top deals.
Delivered daily
Kiplinger Closing Bell
Get today's biggest financial and investing headlines delivered to your inbox every day the U.S. stock market is open.
Sent twice a week
Kiplinger Adviser Intel
Financial pros across the country share best practices and fresh tactics to preserve and grow your wealth.
Delivered weekly
Kiplinger Tax Tips
Trim your federal and state tax bills with practical tax-planning and tax-cutting strategies.
Sent twice a week
Kiplinger Retirement Tips
Your twice-a-week guide to planning and enjoying a financially secure and richly rewarding retirement
Sent bimonthly.
Kiplinger Adviser Angle
Insights for advisers, wealth managers and other financial professionals.
Sent twice a week
Kiplinger Investing Weekly
Your twice-a-week roundup of promising stocks, funds, companies and industries you should consider, ones you should avoid, and why.
Sent weekly for six weeks
Kiplinger Invest for Retirement
Your step-by-step six-part series on how to invest for retirement, from devising a successful strategy to exactly which investments to choose.
People planning to retire in the near future, those already retired and some transitioning to the post-work life have greater concerns about their investments than ever before.
Geopolitical events, the surge in inflation and the expected increases in interest rates understandably are causing people to worry about where their money is going and whether it will grow sufficiently to meet their retirement needs. But they shouldn’t let outside forces they can’t control overwhelm their ability to prioritize, adjust and invest wisely.
Here are six tips that can subtract anxiety and add more certainty to your investment strategy when you are nearing or in retirement:
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
1. Don’t give in to knee-jerk reactions
Turn off the mainstream media financial news programs and random Google searches. They are meant to stoke fear because fear gets viewers and readers. If you listen long enough or read lots of negative financial news, there’s a greater chance that you’ll end up making an ill-advised, poorly timed decision about your investments. Instead, let the curiosity that media sparks lead you to search out personalized advice.
2. Differentiate your money between short-term and long-term
People tend to treat all of their money the same. The financial industry sets it up that way in how it trains advisers. For example, some advisers will tell people that if they have $1 million, they can withdraw a certain percentage of that money every year and be fine. But that approach leads retirees to think that it’s all one pot of money that works just the same, regardless of what type of account they have used for their savings and how the account is invested.
This creates an incomplete picture because, in reality, they will use some money in the short term and some in the long term. For starters, simply by separating the money into those two time frames can help craft a smarter investment and income-distribution strategy.
3. Shore up your income streams
The transition from work to retirement is understandably uncomfortable. Before retirement, you got a steady paycheck from work, but in retirement, you want your money to do the paycheck work so you can go play. Shoring up retirement income streams gives retirees the comfort of knowing they have a certain amount coming in every month and every quarter. That security can change their whole emotional outlook in retirement. It can be the key to having more confidence to do the things they want to do.
It could be helpful to think differently about a retirement income stream. Instead of thinking about it as a percentage of withdrawal from accounts, consider dedicating resources over different periods of time.
For instance, you could have a segment of assets for use in the near term that are not dependent on the stock market, such as cash-like instruments that work similar to a CD, money market fund, or bond. Stock volatility gets discussed about every night on the news and can lead retirees to emotionally respond to their investments and income in line with the ups and downs. If you have income streams separate from the stock market, you are not beholden to market whipsaws.
4. Invest in quality companies for the long term
Because of inflation, longevity, expenses and all the things you want to do in retirement, your money needs to grow over the long term. An enjoyable retirement depends largely on realizing steady growth from investments; therefore, retirees should be invested in some amount of equities.
Investing in quality companies can build investor confidence in retirement because the investor knows what they own. Time has shown that the valid and sustainable investment approach can be to focus on businesses with a sustainable competitive advantage, solid management, fair value for the price and a long-proven track record of navigating economic cycles.
5. Focus on being tax-efficient
Which asset “bucket” you draw money from and the potential tax implications of when you take it to meet retirement income needs should be factored in to your overall retirement plan. Being tax-efficient could make a big difference in your usable dollars. In fact, how much money you’re able to use after taxes could matter more in retirement than how much money you have or how much it grows.
To be tax-efficient, you need to have your money thoughtfully divided into three different buckets:
- The tax-free bucket (including Roth accounts and life insurance), which doesn’t get taxed at all when withdrawn.
- The tax-deferred bucket (IRAs and 401(k) accounts, etc.), which get taxed at your ordinary income tax rates.
- Taxable buckets (brokerage accounts), where the gains get taxed at capital gains tax rates.
You should consider investing differently in each of those buckets based on the tax implications of the accounts and strategize when to pull money from each of them so you can maximize for tax-efficient withdrawals.
6. Let integrated planning help you make sound decisions
A solid investment strategy is about more than what is in your portfolio and its percentage return; it must be integrated into your overall income, investing and tax retirement plan. This is where the additional value of an adviser can be realized. Most advisers don't do integrated planning and, therefore, tend to miss opportunities to maximize income withdrawals, investing efficiency and tax minimization.
The tendency of advisers is to sell a product and simply gather assets to manage a portfolio, leading many to conclude that a portfolio balance or investment prospectus is a plan. The characterization of a product, whether it’s life insurance, annuities, a mutual fund or individual stock holdings, collectively does not constitute a plan. An integrated plan looks at five essential dimensions of retirement design: income, investing, taxes, protection and legacy. It’s one thing to just talk about planning and a completely another thing to have integrated planning that weaves all the pieces together.
When the paycheck from work is gone, your portfolio needs to take over the work for you in retirement. It’s worth it to review your investments at regular intervals to make sure you are taking advantage of the income, investing and tax opportunities that might be available to you.
The appearances in Kiplinger were obtained through a PR program. The columnist received assistance from a public relations firm in preparing this piece for submission to Kiplinger.com. Kiplinger was not compensated in any way.
-
The Cost of Leaving Your Money in a Low-Rate AccountWhy parking your cash in low-yield accounts could be costing you, and smarter alternatives that preserve liquidity while boosting returns.
-
I want to sell our beach house to retire now, but my wife wants to keep it.I want to sell the $610K vacation home and retire now, but my wife envisions a beach retirement in 8 years. We asked financial advisers to weigh in.
-
How to Add a Pet Trust to Your Estate PlanAdding a pet trust to your estate plan can ensure your pets are properly looked after when you're no longer able to care for them. This is how to go about it.
-
How to Add a Pet Trust to Your Estate Plan: Don't Leave Your Best Friend to Chance
Adding a pet trust to your estate plan can ensure your pets are properly looked after when you're no longer able to care for them. This is how to go about it.
-
Want to Avoid Leaving Chaos in Your Wake? Don't Leave Behind an Outdated Estate PlanAn outdated or incomplete estate plan could cause confusion for those handling your affairs at a difficult time. This guide highlights what to update and when.
-
I'm a Financial Adviser: This Is Why I Became an Advocate for Fee-Only Financial AdviceCan financial advisers who earn commissions on product sales give clients the best advice? For one professional, changing track was the clear choice.
-
I Met With 100-Plus Advisers to Develop This Road Map for Adopting AIFor financial advisers eager to embrace AI but unsure where to start, this road map will help you integrate the right tools and safeguards into your work.
-
The Referral Revolution: How to Grow Your Business With TrustYou can attract ideal clients by focusing on value and leveraging your current relationships to create a referral-based practice.
-
This Is How You Can Land a Job You'll Love"Work How You Are Wired" leads job seekers on a journey of self-discovery that could help them snag the job of their dreams.
-
65 or Older? Cut Your Tax Bill Before the Clock Runs OutThanks to the OBBBA, you may be able to trim your tax bill by as much as $14,000. But you'll need to act soon, as not all of the provisions are permanent.
-
The Key to a Successful Transition When Selling Your Business: Start the Process Sooner Than You Think You Need ToWay before selling your business, you can align tax strategy, estate planning, family priorities and investment decisions to create flexibility.
