Investing Doesn’t Stop When You Retire

by Laura Hall, CIMA®, AIF®, Senior Portfolio Manager/Director of Client Services, REDW Stanley Financial Advisors

From Capital Conversations (Fall 2018)View Newsletter

Once upon a time, in a galaxy far, far away, people (mainly men) worked for one company their entire professional career, saved for their retirement, retired at age 65, received a gold watch and a pension, and then did not live very long after that. Does that sound familiar to you? It was certainly the story for my father and both of my grandfathers.

Oh, how times have changed. Now many people (men and women) work for more than one company during their professional lives, save for retirement, retire as early as 62 or even earlier due to corporate actions, do not receive a gold watch or a pension, and live for many years after their retirement date.

Investing during retirement can necessitate a shift in perspective. Prior to retirement, the focus of investing is generally on accumulating assets for retirement, growing those assets, taking on risk, and having a long-term perspective. However, shortly before or after retiring, this focus can change to one of protecting the assets and assuming little or no risk because “this is all the money I and my family will ever have and it has to last us the rest of our lives.”

Rather than taking a long-term perspective, where risk is tolerated, a short-term perspective can dominate one’s thinking, resulting in a significant reduction of risk in order to protect those accumulated assets. As the professionals of REDW Stanley have discussed with our clients, a change in risk tolerance is a normal part of investing for numerous reasons, such as changing family circumstances, health issues, moving to be close to children and grandchildren, or a desire to travel.

Why Tolerate Risk After Retirement?

What is critical to keep in mind throughout the investing cycle, before and after retiring, is the real need to be invested with a reasonable level of risk that will, at a minimum, generate a return sufficient to keep pace with inflation and taxes, while also maintaining the portfolio’s purchasing power. That change in perspective can, and often does, result in a change in risk tolerance—but not in the elimination of risk. As we have noted to our clients, there is no such thing as risk-free investment, but there are risks that may be appropriate to take in order to keep pace with inflation and taxes.

Other reasons to remain invested with a certain amount of risk during retirement may include:

  • The possibility that Social Security benefits will be reduced at some point in the future. Social Security was never intended to be people’s sole source of retirement income, but rather to supplement other sources of income, such as that generated by investments.
  • Life expectancy is increasing due to healthy living habits, improved medical care, techniques and resources, preventative care, and many other factors. As a result, someone who retires at a traditional retirement age of 65 who is in good health can expect to live another 15 to 20 years. The average life expectancy today is 80, longer than the 71-year life expectancy in 1960. As an example, one of my grandmothers died at age 107. Having a portfolio structured according to your personal  risk tolerance can help provide income during a lengthy retirement.
  • Delaying Social Security can boost your benefits. When Social Security claiming is delayed until the maximum age of 70, benefits increase 8% annually. Our Financial Planners, David Cechanowicz and Lauren Malone, can work with you to determine if you can benefit from delaying your Social Security benefits.
  • Health care costs. Studies show that a reasonable amount needed during retirement for medical expenses as a person ages is approximately $260,000. A properly invested portfolio can help cover medical bills, both expected and unexpected.
  • Taxes. Many retirees are surprised at their tax liabilities during retirement. Although retirees no longer receive a regular paycheck, taxes on real estate, including second homes, as well as Social Security benefits and withdrawals from tax-deferred accounts remain.
  • Expenses during retirement. Many retirees do not accurately estimate their expenses after they retire. Health care and taxes are just two expenses in retirement that can surprise retirees. Other expenses, such as utilities, car repairs, home and car insurance, dental care and uninsured prescription costs, will continue in retirement.

How to Approach Investing During Retirement

  • Be realistic. Develop a budget based on a reasonable income and expenses and make adjustments if needed. Taking on more risk in your investment portfolio in order to be able to spend more is not a good strategy. Rather, be sure your portfolio is allocated and invested according to your personal risk tolerance as well as your income and expenses needs.
  • Broaden your horizons. Now that you have time to travel, read those books you never got around to reading, or learn a new skill or hobby, do the same with your portfolio and be sure your nest egg that you worked so hard to accumulate provides the dollars you need to pursue your interests.
  • Keep in mind that people who are in good health and retire at a traditional retirement age can enjoy a retirement of 15 to 20 years or longer. Taking a long-term view of your portfolio during retirement can contribute to your financial well-being and peace of mind.

Members of the Rebellion and the Jedi did not fall prey to the fear of the Galactic Empire (represented by the market and the anxiety about those areas that you cannot control), and neither should you. Rather than disregarding and not following the plan you have in place, contact your Relationship Manager for answers to any questions you might have about your portfolio or the planning services that are available from our Financial Planners, David Cechanowicz and Lauren Malone.

Our planning services can help you prepare for and develop a long-term outlook and perspective before and during retirement. The professionals at REDW Stanley are here to help you work toward and achieve your financial goals and objectives.


Meet Ross Nettles, CPA, MBA, Investment Analyst

Ross joined the REDW Stanley team in 2016 as an investment analyst and tax preparer. Not only did he bring accounting experience and an MBA with a concentration in Finance, but he had also worked several years as general manager of a university golf course —where he was an award-winning men’s golf coach!


Did you know?

  • The Firm: On October 3rd, the REDW Cares Committee hosted our 4th annual non-profit Agency Fair. A number of agencies spent several hours in our Albuquerque office showcasing volunteer opportunities for team members. This Fair also serves as the kick-off for the Firm’s annual United Way campaign.
  • The Economy: Natural gas is an efficient source of heat for many homes and businesses. These three regions account for almost 50% of the nation’s total natural gas production: the Appalachian Basin in the Northeast, the Permian Basin in western Texas and New Mexico, and the Haynesville Shale in Texas and Louisiana. Production in these areas has increased in part because of new drilling and completion techniques. Source: U.S. Energy Information Administration.
  • Our Clients: We have a client couple who are both successful in their respective professions. The husband is an Academy Award-nominated and Emmy-winning filmmaker, and the wife will have her second book published in March of 2019.

©Robert Weber / New Yorker

Copyright 2018 REDW Stanley Financial Advisors, LLC. All Rights Reserved. This publication is intended for general informational purposes only and should not be construed as investment, financial, tax, or legal advice.