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Investing During Retirement: Tips to Make Your Money Last

Investing During Retirement: Tips to Make Your Money Last

Congratulations! You’ve finally retired. For most people, retirement is a huge accomplishment. Sometimes, retirement means setting aside enough money to stop working for someone else and live a life of comfort without having to depend on a regular paycheck. However, retirement can mean differently to other people. There are those who think retirement is about never working again and spending their days doing the things they love the most. Some think it means traveling, pursuing hobbies, and spending more quality time with friends and family. It can also mean working part-time or occasionally to stay busy but without the need to earn an income regularly.

Regardless of what retirement looks like to most of us, the most important thing to remember is to enjoy this time of your life and not having to outlive your savings for retirement. If you’re a retiree, it’s best for you to develop an investing strategy now that will allow you to withdraw money from your portfolio while still allowing it to grow over a long period of time.

Here are some strategies for investing when you retire:

    •    Keep on investing. - You may have been investing for many years in order to earn enough money for retirement but now that you’re retired, don’t think it’s time for you to stop. Here’s a quick fact: Did you know that Canadians continue to live longer with life expectancies projected at birth from 86-90 for men and for women, 89-93 between 2013 to 20751. This only means even if you stopped working, you still need to grow your retirement portfolio since you don’t really know until when you will live. For instance, you’ll need that retirement nest egg to last at least the next two or three decades if you’re retiring in your mid-60s.

    •    Invest Safely. - Make sure a good portion of your nest egg is in safer assets while making investments. This includes bonds and guaranteed investment certificates (GICs). Although your money may not grow quickly or even keep up with inflation in today’s low-interest-rate environment, those assets have a higher chance of being protected than stocks in a market downturn. There are a lot of retirees who make sure they mix stocks, bonds and other investments including real estate. Now you might find yourself worried as to which ones you can mix appropriately since each has its risks and rewards. You may come across experts advising a 50-50 split of stocks and bonds for folks in their mid-60s. However, it really all depends on your tolerance with personal risk. A good strategy would be to set up a portfolio in a way that can protect your funds better when you need them in the next five years just in case a short-term stock market crash happens.

    •    Diversify your investment. - Investors regardless of age should diversify but in retirement, it may be the most critical thing to do. There’s a high possibility that you aren’t bringing in extra income and the portfolio you’ve built up over the past few decades is your only source of income. Even investors receiving company pension may be depending on other money they invested themselves. Putting it all into one stock or sector is risky so don’t do that. Easy and simple ways to diversify your portfolio by sector, geography and asset mix include exchange-traded funds and mutual funds.

    •    Get an Estate Plan. - When you invest money after retirement, you do it not just for yourself but also for your beneficiaries. A good way to ensure any inheritance you leave reaches your beneficiaries in the most tax-efficient manner possible is through having an estate plan. Mark Charnet, founder & CEO of American Prosperity Group in Pompton Plains, New Jersey said estate taxes can and most likely will be re-imposed even though they have fallen as of late. It’s best to have these planning documents organized accordingly: a will empowering your executor to carry out your requests, a living trust for the probate to be avoided, a power of attorney allowing a person to act on your behalf to make financial decisions, a health proxy doing the same but for health decisions and a living will with directives to physicians that are advanced and specific.

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