As you get closer to retirement, it’s normal for your investment priorities shift – in fact, they should. The aggressive growth strategies that may have worked in your 30s and 40s might not align with your financial goals now that you’re knocking on retirements door. Instead, preserving wealth and generating sustainable income become key considerations. If you’re looking for tips on adjusting your investment strategy for retirement, here’s what you may want to know.
1. Shift from Growth to Income
During your working years, your investment focus was probably more on long-term growth. As retirement nears, it’s time to consider a strategy that balances growth with income generation. Investments such as dividend-paying stocks, bonds, and annuities have the potential to provide a steady stream of income while maintaining some exposure to market growth.
Key Considerations:
- Evaluate the need for income-producing investments.
- Maintain a level of growth to offset inflation.
- Diversify your portfolio to reduce risk.
2. Reassess Your Risk Tolerance
As retirement approaches, your approach to risk may evolve. While maintaining some market exposure can play a role in your financial strategy, a market downturn at the wrong time could affect your retirement savings. Regularly reviewing your portfolio can help you assess whether it continues to align with your risk tolerance and time horizon.
Steps to Take:
- Consider reducing exposure to high-volatility stocks.
- Explore a mix of bonds and fixed-income investments.
- Review your asset allocation to determine whether it aligns with your current financial objectives.
SEE ALSO: Key Strategies for Risk Management in Investing
3. Create a Sustainable Withdrawal Plan
A key part of adjusting your investment strategy for retirement is understanding how to withdraw funds in a way that sustains your lifestyle. A structured withdrawal plan helps you avoid depleting your assets too quickly while balancing market fluctuations.
Consider These Strategies:
- The 4% rule (with adjustments based on market conditions).
- Creating a bucket strategy, where assets are divided based on short-, medium-, and long-term needs.
- Factoring in required minimum distributions (RMDs) for tax-advantaged accounts.
4. Optimize for Tax Efficiency
Tax considerations play a big role in retirement planning because a tax-efficient strategy can help you keep more of what you’ve worked hard to save.
Tax-Smart Moves:
- Be strategic about withdrawals from taxable vs. tax-deferred accounts.
- Consider Roth conversions to manage future tax liability.
- Plan for Social Security benefits and their impact on your taxable income.
SEE ALSO: Developing Your Post-Retirement Investment Strategy
5. Regularly Review and Adjust Your Plan
Retirement is a journey, not a one-time event. Your life circumstances, market conditions, and financial goals are bound to change over time, so it’s only right that your investment strategy should remain flexible. Scheduling regular reviews with a financial professional can help you stay on track.
At TriCapital Wealth Management, we work with clients to build retirement strategies tailored to their unique needs. If you’d like to discuss how to optimize your investments for this next phase of life, we’re here to help.
