Timing Of Your Retirement
-
Loading... - Duut Adriana
- 02 Mar 2023
- 62 Views
- 0 Like
- 0 Comment
The day of Retirement is here! You have banked your last paycheck. You are starting to draw from your retirement accounts…
And BAM! There is a Bear market. What do you do?
Sequence of return comes into play- in a down stock market it takes more shares to get the same amount of money each month. That leaves fewer shares available for when the market rebounds.
SMART STEPS TO HELP PRESERVE YOUR PORTFOLIO
(1) Reducing your monthly withdrawal amount.
Often retirees living expenses go up when they retire. They are doing everything they didn’t have time to do while they were working.
Evaluate your monthly expenses and see where you can reduce costs. The less you take now, the more you will have later.
A variable withdrawal rate can extend the life of your retirement accounts. Drawing more from your accounts when the stock values are higher and less when they are lower.
(2) Using other Assets.
Draw from your bank accounts- savings and money markets. Possibly CDs and Treasury Bills.
Access cash value from your life insurance policy. Do not jeopardize the policy lapsing. You may consider paying the loan back when the stock market is on firmer footing.
Modifications of home loans may reduce mortgage payments; reducing in monthly cash flow.
Drawing from the other sources will preserve the shares of your portfolio, allowing you to wait for a Bull market again.
(3) Creating Greater Diversity in your Portfolio.
In the accumulation stage of preparing for retirement, investors tend to be more aggressive in their portfolio. In a market down-turn, they aren’t overly concerned because they have the time to let their investments recover.
In the distribution phase of retirement planning, you may want to remove some of the risk from your portfolio. It doesn’t necessarily mean more bonds. It can mean shifting away from some growth stocks to dividend paying stocks. Being invested in more defensive positions like consumer staples and utilities.
You may still want a position in small and mid-cap. These generally have more volatility than large-cap stocks. Historically, they have provided strong growth. If you are newly retired, you may easily have 20-30 years ahead. You still need growth in a portfolio. Small and mid cap might be an option. Read More…
