The early years in retirement are among the most important when it comes to how long the money in your retirement accounts will last. Make the most of your hard-earned savings with these top five money moves to make in retirement.
Keep the right risk-return balance in your investments
Going too conservative with your investments can be as hazardous as being overly aggressive. That’s because an asset allocation strategy that errs too much on the conservative side may expose you to the negative effects of inflation, erode your savings, and limit the potential that diversification can bring.
Your retirement may last upwards of 30 years or more, so you’ll want to continue to balance risk and growth potential with the right mix of investments. As always, this asset allocation should reflect your time horizon, risk tolerance and financial goals.
Devise your withdrawal approach with taxes in mind
A starting point for your withdrawal strategy could be withdrawing no more than 4% to 5% of what you’ve saved for retirement. But take your strategy further by considering a “proportional withdrawal” approach rather than the more conventional approach of withdrawing from taxable accounts first, then tax-deferred accounts, then tax-free assets.
Proportional withdrawals involve taking assets from all accounts each year in proportion to your retirement savings. This strategy spreads out and could ultimately reduce the impact of taxes on your retirement income. It may not be for everyone, though, particularly those who have large capital gains. Talk to your wealth manager and tax professional to optimize your withdrawal strategy.
Strategize Social Security benefits
You contributed to social security throughout your working years, and now you need to know the ins and outs of taking this guaranteed income stream. There are hundreds of strategies for claiming your social security and more than 2,000 governing rules. Depending on your marital status, you’ll want to select the best strategy. Discuss this with your financial advisor.
Invest in long-term care insurance
About half of people who live beyond the age of 65 will need long-term care at some point, and out-of-pocket estimates are around $140,000. Neither Medicare nor private health insurance will cover those expenses, so consider a long-term care insurance plan.
An alternative to think about is a hybrid policy: whole life insurance that you can draw from to pay for long-term care. However, these hybrid policies can cost a great deal more than traditional long-term care insurance.
Stay close to your financial or wealth advisor
Get peace of mind and strategies for lasting retirement savings when you have a trusted financial professional at your side to help during the decumulation phase. We can help you with withdrawal strategies, IRA conversions, claiming social security benefits, health insurance planning, legacy and estate planning, and more.
It can be tricky to navigate the transition from saving for retirement to spending in retirement. Let us give your financial life the care and consideration you need so that you can best manage your retirement income.