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Retirement Investing Doesn’t End with Retirement

We plan for our clients to live to 100—a couple of our clients have gotten very close. Think for a minute what that means if you retire at 65, for example. You have 35 years of housing, food, medical costs, taxes, and inflation to fund. Making investments work for you before and after retirement is critical.

Inflation is quiet erosion of buying power. Here is one example. If you pay $3000/month in rent, after 10 years of 3% inflation that rent would be $3800, and after 35 years you are facing a whopping $8200 bill. Of course expenses don’t end with rent, and we plan for some, like health care, to rise faster than 3%. It’s very inconvenient to run out of money in retirement.

Investing for Life After Work

So this where thoughtful investment management before and after retirement comes in. As a potential weapon against inflation and long happy life of expenses, we suggest investing regularly and managing an appropriate growth-oriented portfolio.

How to get started? First off, consider how comfortable you are taking investment risk. Recall October 6-10, 2008 when the Dow Jones Industrial Average fell 18% in a week, reducing a million dollar portfolio by $180,000. Did you sell, hold, or buy?

You’ll need a strategy that aligns with your comfort taking risk in exchange for long term gains. We’ve worked with clients that misjudged their comfort with risk and sold investments at the worst possible time, waiting for months or years to get back into the market.

So now you have a reasonable basis to start investing. Next, as we have outlined in past articles, explore options for retirement investing through your company plan and/or IRAs. Finally, consider saving and investing outside of retirement accounts to have more “liquid” assets.

Ok, so we’ve covered all of that, what is next?

Disciplined Investing

An investor reaches 65 having built a pool of funds for “life after work” which might start any time now. Does the strategy change? We think yes and no.

What remains the same?

• Allocation in line with comfort taking risk and income needs

• Objective buy/sell process to evaluate and replace under-performing or inappropriate investments

• Need to grow assets to keep ahead of inflation which usually means riskier growth assets balanced with income assets

What changes?

• New need to create systematic withdrawals to replace a paycheck and plan for those big ticket trips, family gifts/help, and other unforeseen expenses

• New tax realities in line with a smaller or eliminated paycheck and perhaps the start of taking assets from retirement plans

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. Investing involves risk including loss of principal.

Scot Millen and Nancy Briguglio are registered representatives with and Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through Private Advisor Group, a registered investment advisor. Private Advisor Group and Brightworks Wealth Management are separate entities from LPL Financial.

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