Retirement is a time to enjoy the fruits of your labor. But even after you have stopped working, it's important to make sure your money continues to work for you. Investing wisely can help you maintain your lifestyle, protect your nest egg, and even leave a legacy for your loved ones. Here’s a straightforward five-step guide to help you navigate investing after retirement.
Step 1: Revisit Your Financial Plan
Financial planning is not just for building wealth—it’s equally important during the years you’re spending it. The economic landscape, marked by events like the pandemic and market fluctuations, can impact your retirement portfolio. It is wise to sit down with your financial advisor to review your investment portfolio. Make sure your investment strategy aligns with your retirement goals and consider whether new investments could affect your retirement income.
Step 2: Understand and Manage Risk
Investing during retirement comes with different challenges than during your working years. While buying in a down market might seem appealing, retirees need to be cautious. Since you may need to access your funds sooner rather than later, your investments should be aligned with lower risk levels. This approach helps avoid potential losses from needing to sell investments during a market dip.
Step 3: Planning for Inflation in Retirement
Inflation in retirement can erode your purchasing power, making it essential to consider how it impacts your portfolio. Certain investments, like those in energy or consumer staples, may offer protection against rising inflation and potentially during a recession. However, once inflation starts to decline, you may need to shift your focus to investments that aren’t as sensitive to interest rates.
Step 4: Explore Potential Lifetime Income Investments
Retirees often turn to bonds for their perceived safety, but with current rates, bonds may not always keep up with inflation. An alternative to consider is a Fixed-Indexed Annuity (FIA). FIAs can provide returns linked to a market index like the S&P 500, while also protecting your principal. These annuities offer a potential lifetime income stream, providing added financial security during retirement.
Step 5: Consult with a Fiduciary Financial Advisor Near You
If you’re retired or nearing retirement and thinking about investing, now is the perfect time to meet with a fiduciary financial advisor. A fiduciary financial advisor acts in your best interest, providing personalized guidance and helping you make informed decisions that align with your unique retirement goals and circumstances. A tailored approach can help you maintain financial stability while pursuing growth opportunities.
In the context of financial advising, a fiduciary is a professional who is legally and ethically bound to act in the best interests of their clients. This means they must put their client's needs ahead of their own and avoid any conflicts of interest.
When choosing a financial advisor, especially for retirement planning, working with a fiduciary can provide peace of mind, knowing that the advice you receive is unbiased and tailored to your specific financial goals.