5 Steps For Recent Retirees to Take Today

What is happening in the world today is obviously unprecedented. Your age, likely, has had a dramatic effect on how you are perceiving our current events as well. From an investment perspective, if you’re in your 20’s or 30’s, chances are your concerns are far different than someone in their 50’s or 60’s. Those individuals that are near the end of their working years.  Even more so if you’ve just recently pulled off of the Road to Retirement and are beginning to enjoy your Golden years. 

Think about what that population is going through right now. You work a lifetime to accumulate what you have.  Maybe it’s a lot, maybe it’s just enough.  But it’s what you’ve got, and you’re proud of it.  And as soon as you make the leap into retirement, a global pandemic hits.  Suddenly, you’re concerned about your health and the health of your family.  On top of that, the markets tumble, and suddenly the money you planned to live the rest of your life off has plummeted in value.  Furthermore, all economic data is pointing towards a recession, and the prospect of an easy transition into retirement is now filled with massive amounts of uncertainty. Think of their concerns. Will I run out of money? Will I need to go back to work? If I need to go back to work, are there even jobs available? What do I do?

It is certainly a scary position to be in. But there are things you can do to shield your portfolio in times like these.

  1. Focus on your budget. It sounds overly simplistic, and it is. But the reality is no financial plan can be created or adjusted without understanding the basic math of what’s coming in vs. what’s going out.  This is more important while you’re living on a fixed income. Your most basic living expenses should ideally be covered by sources of income not subject to investment performance (Social Security, pension, etc.). It’s certainly possible your “entertainment” expenses have decreased as a result of staying at home (assuming it’s not all going to Amazon, that is.) But focusing first and foremost on your expenses, and in turn on what source of income(s) will cover those expenses, must be of prime importance.
  2. Have a withdrawal strategy. There are advantages and disadvantages of drawing down on different investments while in retirement. If possible, now is probably not an ideal time to draw down on your equity investments.  The worst time to draw down on equities is while their value is decreasing. It’s one thing for equity investments to decrease, but withdrawing from them while they’re decreasing only compounds the losses, and reduces the ability of those investments to recover.
  3. Manage your tax liability. It’s a fallacy to believe taxes aren’t as prevalent in retirement. They are still a major burden, and one of the biggest expenses in retirement. Drawing income from different sources could have different tax liabilities, so pay attention to that. There are also opportunities while there are losses to look at strategies like tax loss harvesting to mitigate your overall tax liability.
  4. Reduce risk. You’re already seeing a high level of volatility in the stock market. It stands to reason this will continue for the foreseeable future. If your personal risk tolerance isn’t wired to take much risk with what you’ve got, there are number of ways to reduce your overall risk exposure while keeping pace with inflation, while allowing for some growth.  If you’re unsure what your risk tolerance is, or how to quantify it, that’s something we can help with as well. 
  5. Seek out advice. Times like these have a way of paralyzing people. Ironically, while investors are paralyzed, is ultimately the most valuable time for them to seek advice. This is when financial planners can provide the most value, and in turn, peace of mind. It is one thing to worry about your spending and change a lot of habits when you need to. It’s another thing to do so unnecessarily, when it comes at a cost of enjoying your retirement.  A solid financial plan can help with understanding truly how much your portfolio is worth, and how it can withstand the turbulent times we find ourselves in.


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