How to Invest After You Retire

Whether you’ve been a savvy investor your whole career, or you’ve decided now is the time to buckle down and craft a retirement income plan, investing in retirement can be challenging. As you strategize and weigh your options, there are a few key factors to keep in mind that can help guide you toward the right solutions for your particular needs. We’ve outlined these considerations below, as well as the types of investments that may work for you throughout retirement.

Investment Considerations For Retirement

Creating a steady source of income throughout retirement is typically done through lower-risk investments. However, keep in mind that you arguably will have a 20-30 retirement period and you need to continue growing your money in your retirement years. There are many factors that can affect which types of investments may work best for you including your timeline, risk tolerance and personal goals. As you seek out the right investment options for you, be sure to keep the following factors in mind.

Balance Your Income and Expenses

At its core, retirement is a balancing act. You need to obtain adequate income to meet your desired lifestyle in retirement and without a paycheck or proper plan in place, this can be challenging. We often suggest you first identify how much you need to withdraw from your investments, over and above fixed income sources like a pension and Social Security. Once this amount is known, set aside 3-6 years' worth of withdrawal needs in more conservative fixed income investments. That way, even if the market is down for a prolonged period of time, you have adequate resources to withdraw from within your accounts without having to sell stocks when they are down.

Extended Life Expectancies

As you focus on developing alternative sources of income, it’s important to remember that you could be living in retirement for longer than anticipated. In fact, just between 2000 and 2016, the average life expectancy increased by 5.5 years.¹ Today’s retirees can expect to enjoy retirement for anywhere from 15 to 30 years, longer than previous generations. In terms of investments, this presents a need to consider long-term investment options that can provide income during your later years.

Prepare For the Unexpected

The longer you live, the greater the chance there is that you’ll experience unexpected expenses. This can include anything from loss of income due to the death of a spouse or the need to pay for a grandchild’s college tuition. It’s important to stay flexible in your investment options and retirement strategy, as you never know what expenses may lie ahead.

Types of Investments

Once you’ve taken into consideration the factors that can affect your income throughout retirement, you should weigh your actual investment options. Below are a few of the most common types of investments you may want to consider using throughout retirement.

Bonds

While bonds may have been an unappealing option in your younger years due to their relatively low rate of return, they can offer reliable income that works well for many throughout retirement. When you choose bonds or bond funds to invest in, consider the interest rate environment that you're in at the time and its effect on bond returns and yield.

Stocks

Typically, the older you get the more conservative you’ll want your investments to be. But that doesn’t mean you should eliminate stocks in your portfolio completely. Depending on your age, risk tolerance and other aspects of your retirement strategies, stocks that offer growth can have the potential to increase your earnings at a greater rate than other types of low-risk investments and better your chances of adequately funding a well-designed retirement plan. 

The truth is, a majority of households in America simply are not saving enough to last throughout retirement. In fact, two-thirds of Americans have saved less than 11% of their annual income.² With longer life expectancies and unexpected expenses, that simply won’t last, many American will eventually find themselves well underfunded for retirement. That’s why it’s more important now more than ever to focus on how you can make your money work for you now and throughout your retirement years to live a fulfilling chapter in your life.

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