Retirement is a watershed moment in life, especially for individuals who have spent years amassing assets and creating a comfortable financial cushion. However, no matter how diligently you save, there is always the possibility that something will happen to your money. 

The necessity of safeguarding and cultivating the riches you’ve worked hard for only grows as you approach retirement. In this section, we will look at essential tactics for navigating risk and securing one’s financial future for retirees and pre-retirees. Here’s what you should know.

Adapting Your Risk Tolerance to Your Life Stage

According to a recent TIAA study, more than half of American citizens are unaware of the average length of retirement years. Understanding your savings target and the quantity of risk you’re ready to accept to get there is therefore an important step in retirement planning. 

When retirees go from the accumulation period to the distribution phase during retirement, their risk tolerance changes. When you’re younger, your risk tolerance is often lower, allowing you to take a more aggressive investment approach because you have more time to recover from losses. However, as you approach your golden years, you should shift from aggressive investing to a more conservative approach.

During volatile periods like this, many investors panic and sell particular stocks to avoid further losses. However, even when panic sets in, the markets normally remain resilient. This is why, while gently altering your approach may be useful in certain circumstances, always check with a trustworthy advisor first to avoid making emotionally driven decisions based on brief market moves, which may result in missed opportunities or avoidable losses. 

You should also think about including defensive investment strategies in your strategy. Bonds, for example, are less volatile than stocks and can give a more secure income source. Dividend-paying companies might also be a good addition because they provide both growth potential and reliable dividends.

Assist in the prevention of inflation

Savings are important for sustaining your financial well-being, but what happens when you include inflation?

The impact of inflation on purchasing power is significant, particularly during retirement. In July 2023, the inflation rate increased by 3.2% as compared to the previous year. Retirees should look at different financial options to assist in reducing the consequences of inflation. Here are a few options to examine to help protect your investments against inflation: 

  • Gold
  • Commodities
  • Stocks and Bonds
  • Real Estate
  • Leveraged loans

Retirees can enhance their finances by including these alternative investments in their portfolios, which will assist in securing the durability of their financial resources throughout retirement.

Diversify your investments.

As you approach retirement, the requirement for a well-diversified investment strategy becomes even more apparent. A well-diversified portfolio can help guard against the impact of market volatility, economic downturns, or unanticipated occurrences that may disrupt the economy. 

Any investment strategy relies on diversification. A well-rounded and diverse portfolio should incorporate a variety of asset types from various sectors and countries. This method reduces risk by avoiding over-reliance on a single investment and increasing the chance for consistent returns over time.

You may help protect your investment with greater stability and less uncertainty by teaming with an expert Fiduciary advisor. 

Taxes Should Not Be Ignored

Aside from these investment factors, don’t forget about taxes and their impact on your retirement. Your portfolio will most certainly include taxable, tax-deferred, and tax-free investments. Each sort of investment has its own tax treatment, which affects how much tax you’ll incur when you remove cash. 

  1. Taxable Investments: Stocks, bonds, and mutual funds are all held in a conventional brokerage account. Gains from these investments may be subject to taxation. This varies depending on how long you’ve owned the asset. Planning when and how to sell these assets in retirement might help you manage your taxed income.
  1. Tax-Deferred Investments: Traditional IRAs and 401(k)s provide tax-deferred growth. While contributions to these accounts are tax-deductible during your working years, withdrawals are taxed as ordinary income when you retire. Strategically controlling withdrawals can help you keep your tax liability under control.
  1. Tax-Free Investments: Roth IRAs and Roth 401(k)s provide for tax-free withdrawals during retirement. These accounts are funded with after-tax monies, but eligible withdrawals are tax-free. Utilizing these accounts can assist you in generating a tax-efficient income stream.

Working with a Fiduciary advisor can assist you in understanding the tax implications of various methods and aligning them with your overall retirement goals.

Seeking Professional Help

Navigating investing, particularly on the road to retirement, can be difficult. Working with a trustworthy advisor can provide you with peace of mind while also assisting you in making sound financial decisions. Our Fiduciary advisors’ experience can help give the following: 

Regularly examining your financial portfolio and evaluating its success.

Examining whether your investments are in line with your financial objectives.

By making timely modifications, you can help to ensure that your portfolio maintains its planned asset allocation.

Working with Fiduciary advisors, such as the Goodman Green Wealth Management, can give valuable insight and support with regard to your investing and asset preservation strategy. We try to provide unbiased advice that is in line with your financial goals and needs, giving you unbiased counsel when you need it the most. 

Last Thoughts

Preserving money and understanding risk are critical components of a successful retirement plan for retirees. You should use defensive investment methods to assist you in handling market changes and protecting your capital. Remember that the idea is to strike a balance between maintaining your wealth and allowing it to expand in a way that corresponds with your financial objectives.

Our Fiduciary-led firm, Goodman Green Wealth Management, is dedicated to assisting Iowans in achieving a secure financial future. We recognize that entering the investment industry might be intimidating.  Schedule your complimentary consultation here today if you have investment queries or want more information about our services.

About the author 

Victor F Green

Goodman Green Wealth Management has been in business for over 22 years helping people in and around Chicago , IL. achieve their financial goals and enjoy a comfortable retirement by offering comprehensive retirement planning and wealth management services with a heavy emphasis on financial education.

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