You’ve worked your entire adult life to scrimp and save for a fulfilling retirement and, now that you’re either on the home stretch or already enjoying your golden years, you might be wondering what comes next with your finances. Given today’s life expectancy rates – significantly higher than those from just a few decades ago – it’s may be more important than ever to get your money to work for you as efficiently and effectively as possible.
Therefore, just because you cross the retirement finish line doesn’t mean that investing is suddenly part of your past. In fact, given those life expectancy rates – as well as inflation and the simple idea of enjoying your retirement – finding ways to help get your money to grow as well as possible without absorbing excessive risk is important in maintaining financial stability throughout retirement.
The first step in helping maximize what your money does for you in retirement is to decide how much you need to maintain in savings in order to comfortably handle your expenses as well as vacation, entertainment, and life’s financial curveballs. Since everyone is built differently, there is no right or wrong answer but, when determining your number, always remember that excess cash may not be as beneficial as it could be. Anything above what you need both financially and give you confidence is not working effectively for you if it just sits in cash.
The interest rate environment at any given time is likely to be one of the determining factors in choosing what to use as a cash alternative for excess savings. Certificates of Deposit should offer interest rates higher than those found in savings accounts or even money markets while still potentially offering federal deposit insurance. However, in a depressed interest rate environment, even CDs can suffer under the weight of low rates.
Instead, a variety of fixed instruments like bonds, fixed annuities, and fixed income mutual funds or ETFs may provide returns without subjecting you to undue risk and volatility. If used appropriately, they can even maintain a fair amount of liquidity.
The Battle Against Inflation
Hopefully, you have a long and fulfilling retirement in store for you. The longer the retirement, however, the more impact inflation will have on the purchasing power of your money. Therefore, using a portion of your assets to effectively fight against inflation could be in your best interest as long as any such strategy still suits your personality and goals.
Dividend yielding stocks may provide an additional source of income while still benefiting from the long-term appreciation of the equity markets. Alternatively you could also use Treasury inflation-protected securities (TIPS) to fight inflation but they lack the liquidity and long-term growth prospects of equities.
Ultimately, investing for seniors requires a delicate balance between potential growth and risk, financial health and confidence in your financial strategy. If unsure of the optimal strategy for your specific needs and goals, we can help you work towards finding that balance.
This content is designed to provide general information on the subjects covered. It is not intended to provide specific legal or tax advice and cannot be used to avoid tax penalties or to promote, market or recommend any tax plan or arrangement. You are encouraged to consult your personal tax advisor or attorney.
Gary Marriage Jr. is the founder and CEO of Nature Coast Financial Advisors, which educates retirees on how to protect their assets, increase their income and reduce their taxes. Marriage is a national speaker, delivering solutions for pre-retirees, business owners and seniors on the areas affecting their retirement and estates. He is an approved member of the National Ethics Bureau, and has been featured in “America’s Top Hometown Financial Advisors 2011” and was selected to contribute to a book with Steve Forbes titled “Successonomics”
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