Are you interested in continuing to invest during retirement? Hopefully your answer is yes. Just because you are no longer working doesn’t mean you have to stop investing. In fact, this is something you need to do if you want your money to last as long as possible.
Maximizing returns during retirement means taking many of the same steps as you did before retirement – along with a few others. Although your situation has changed, you can rely on what you learned in the past to ensure that your future is bright.
Above all else, it is important to realize that you may live a large portion of your life in retirement. This means you have to invest wisely before and during to ensure that your money lasts and you are able to live the life you enjoy.
Here are three basic tips for investing during retirement:
1. Plan your asset withdrawal rate in advance. Simply put, the less money you withdrawal the more money you will earn from your investments. Along with this, lower withdrawal rates give you a better chance of having money available until the day you die.
If you are going to retire at 65, most experts suggest a withdrawal rate of approximately three to four percent per year.
2. Don’t take chances. When you are young and trying to build your retirement savings you are able to task risks, such as investing in stocks. After all, even if things get bad they are sure to turn around at some point in the future. During retirement you want to stick with low risk investments that you don’t have to worry about.
3. Determine the costs associated with your investments. Every expense is going to lower your returns. This can be anything from commissions that you pay to mutual fund management fees. Although your fees may seem small, they can really add up over time. By relying on lower cost investments you can make your money last longer.
4. What are the tax implications? As you probably know, taxes can greatly reduce investment returns. When you invest in “tax beneficial” vehicles, such as Roth IRAs and 401(k)s you can help minimize your tax burden.
During retirement you will probably find it necessary to sell investments from time to time. For this reason, you need to get advice from an accountant before moving forward. This way you know how your tax situation is going to be effected.
5. Have cash available. You never know when you will need cash to pay for an emergency or unexpected expense. There is no reason to have all of your investments in cash, but you do need enough in case you have to get at it in a hurry.
These five tips should help you best invest your money during retirement. This is not a time to sit back and hope that your money lasts. You are going to be around for many years to come, so make sure you are investing properly.