For those approaching retirement or already there, the question of how to invest our money to maximize returns while minimizing risk is at the heart of many of our financial concerns. With so much out of our control and so few clear answers, retirement investment questions can keep you up at night.
Here are a few of the most common issues and some suggestions for how to manage things to reduce stress.
1. Is my money invested so that it will be there when I need it?
Figuring out how to align your portfolio with your withdrawal strategy might be the most important investing issue that retirees deal with. It’s critical before designing any sort of retirement investing strategy that you have a handle on your spending needs and you know what you need to withdraw and when.
Taking this a step further, you must have a handle on your sources of retirement income. How much of your income will come from fixed sources like Social Security or a pension? And, how much will you need to withdraw from your various investment accounts and when? Beyond your day-to-day living expenses, you will need to plan for anticipated major expenses such as purchasing a car, a major trip or any number of other big expenses.
Matching your fixed sources of income with your projected expenses will tell you how large of an income replacement gap you need to fill, in other words how much of your monthly and annual outlays will need to come from your investments in retirement and non-retirement accounts.