Smart Investing at Any Age: Preservation
We’re now at Stage 2 in our journey through a life of fiscal planning. If you haven’t already, be sure to check out the post on Stage 1 – Accumulation, which details savings and investment strategies during your income-earning years.
Preservation of financial resources is a hot topic right now. The baby boomers are anyone born between the years 1946-1964, a period of time that includes nearly 80 million Americans. Given an average retirement age of 65, 2011 is the first year that baby boomers will begin to hang up their hats, and that’s just the beginning. There are still eighteen years to come, each of which will see the retirement of millions of Americans.
Financial resources and quality of life go hand in hand, so it’s important to handle your assets with care and prudence. With the current average lifespan, a non-smoking retiree will spend nearly as much time in retirement as he or she spent working. Thus, you must find a way to allocate your money for acceptable risks, desirable rewards, and optimal sustainability. Remember, your CPA can help.
The single most important factor in your retirement is the value of your dollar. The goal is to figure out a way to maintain the same standard of living as the very first day of retirement. Critical allocation of your investments between fixed income investments ( bonds) and stocks and knowing when and how to change the allocations provides the retiree the greatest control and probability of a quality financial retirement. Given the time-span of the retiree, the stock market alone may be too volatile to incorporate all of your assets. This is money you need to live off of, so combining your stocks with a more stable investment is a safer way to go.
Many retirees should choose to invest 40, 50, or 60 percent of their assets in stocks. This decision is subject to several considerations which you can work out with your family and your CPA.
- What are your living costs?
- What are you getting from Social Security?
Using the answers to these important questions, you can determine how much you need from your financial portfolio to live comfortably.
Work with a CPA to allocate a section of your portfolio to a low-risk investment, like a bond. Any remaining assets can then be invested in a diversified stock portfolio, giving you a safe place for more consistent growth without sacrificing the larger potential returns of the stock market.
You can always talk to your CPA with questions about these critical fiscal decisions. They are there to help!
