At Retirement Planning Made Easy we strive to simplify the retirement process for you. One way we do that is by bringing to your attention great, simple, quick-to-the-point articles we come across on the Internet.
A good one put out by David Ning was found over at U.S. News & World Report. It lists 5 blind spots you may have in your retirement plan. These are definitely some good retirement tips for Baby Boomers.
I summarize below:
- Setting spending targets that are too conservative – A good rule of thumb for a withdrawal rate from your retirement portfolio is 4%. But some people want to be even more conservative by only withdrawing 3% or 2%. While that is noble to be frugal, it may be even better to stay flexible with your withdrawals. There may come a time to decrease your withdrawal rates to 2%, such as when the markets have caused your portfolio to decline in value. There’s nothing wrong with being conservative, but it is also wise to be flexible and reduce your withdrawals if you can when your portfolio has declined.
- Your time horizon doesn’t end when you retire – If you retire at age 65 (like many do when they can qualify for Medicare) you could be retired for the next 30 years. Living to 95 is not unreasonable. So don’t go too conservative on your portfolio. It needs to last you a long time. And you need it to at least keep pace with inflation. I will add that you want to try to minimize volatility in your portfolio in retirement. But you also have to keep an eye on growth. Your retirement can be long.
- Don’t stop managing your investments in retirement – Don’t “set it and forget it” with your portfolio. You need to review it. I recommend at least an annual review with your financial advisor. Maybe even a bi-annual review. And if you are a do it yourself investor, then you still need to review your holdings and make sure they are in line with your goals and risk tolerance.
- You may not be sharp forever – You may have an investment strategy that requires some time on your part to manage. It may also require some expertise on your part that other people don’t have. If you lose the capacity to stay on top of your investments, then someone else will have to pick it up on your behalf. Will they know what to do? Make sure you have a plan to simplify your investment strategy for when that time comes that you may not be able to handle all the complexity of your portfolio.
- Priorities change over time – When you retire one of your priorities may be to actively manage your portfolio and add on complexity that (you hope) yields you a few extra dollars of return. But keep in mind that your priorities may change. You may decide you want to spend more time with family, like your kids or grandkids. And you may not want to invest that extra time in managing your portfolio just to earn a few extra dollars. The problem is sometimes it can be difficult to change investment strategies and simplify your portfolio without some tax consequences. So have an exit plan for complex investment strategies, just in case your priorities change and you don’t want to have an investment strategy that requires too much of your time.
Those are 5 good tips it never hurts to remember. To read the full article, CLICK HERE.