Making important decisions about investment strategies in advance of retirement will guarantee growth and stability of funds throughout your post-retirement years. With correct planning, your nest egg can be maintained, and even grown, to ensure a comfortable retirement income and offer you the ability to take care of loved ones after you’ve left the workplace. With so many investment options at your disposal, it’s critical to select the ones that best fit your retirement strategy and objectives, risk tolerance, and time horizon.
How Do I Understand My Retirement Goals & Invest Accordingly?
It is critical to define your retirement goals before delving into investment options. Think about things like your:
- Timeline
- Risk tolerance
- Income requirements
- Ideal retirement lifestyle
Do you have grandiose plans for your travels and lifestyle, or are you just hoping to live a comfortable retirement with modest outlays? Your goals will inform your asset allocation strategies and investment decisions. The more active and expansive your retirement plans, the more investment risk you may need to take to ensure you have the funds available to make those plans a reality.
What is my Investment Risk Tolerance in Retirement?
Determining your level of investment risk tolerance is yet another essential step in selecting retirement-appropriate investment strategies. Assess your level of comfort with:
- Volatility
- Possible losses
- Changes in the market
While older investors might favor more conservative investments to protect capital, younger investors typically have longer time horizons and can afford to take more risks and invest in growth-oriented assets. A far distant time horizon gives a younger investor time to adjust strategy and make up for losses and volatility in the market. Older investors don’t have the luxury of time, so their strategies may lean towards being less risky. Risky investments can pay off big, but they are also more volatile, so discussing your risk tolerance with a professional retirement financial advisor is one of the first steps you take when establishing your strategy.
To determine your risk tolerance, please contact our office to schedule a thorough evaluation of your risk tolerance and develop a customized retirement investment strategy aligned with your goals and comfort level.
What Should My Retirement Investment Portfolio Look Like?
The deliberate division of your investments among various asset classes, including stocks, bonds, cash equivalents, and real estate, is known as asset allocation.
An optimally diversified portfolio can aid in risk management and return optimization. Younger investors might, for instance, allocate a larger percentage to stocks due to their potential for growth, whereas older investors might allocate a larger percentage to bonds due to their stability and income.
That being said, older investors can also allocate a portion of their portfolio to be targeted at more risky investments if they feel comfortable with that risk. Always discuss the pros and cons of a risky vs conservative portfolio with a qualified retirement investment advisor – we’re here to help.
What are My Investment Options in Retirement?
Building a robust retirement portfolio requires careful consideration of various investment strategies and vehicles. Most retirement portfolios combine these elements and are generally diversified, so more conservative options guard against more risky retirement investment choices. Below are key components designed to help you navigate your retirement planning journey effectively:
- Stocks: Although investing in individual stocks or exchange-traded funds (ETFs) has a higher volatility, it can offer growth potential. As you choose stocks for your portfolio, consider variables like industry trends, company fundamentals, and portfolio diversification.
- Bonds: Compared to stocks, bonds offer fixed income and less risk. The yields and risk profiles of corporate, municipal, and Treasury bonds vary. Modify bond allocations in response to changes in interest rates and the state of the economy.
- ETFs (exchange traded funds) and mutual funds: These diversified investment vehicles combine the capital of several investors to make a wide range of asset classes. Select ETFs or mutual funds based on their expense ratios, risk tolerance, and investment goals.
- Real Estate: Real estate investments, including rental properties, real estate investment trusts (REITs), or real estate crowdfunding platforms, can provide income and potential appreciation. Evaluate property values, rental yields, and market trends before investing in real estate.
- Retirement Accounts: Maximize contributions to tax-advantaged retirement accounts such as 401(k)s, IRAs, or Roth IRAs. Take advantage of employer matching contributions, tax deferrals, and potential growth opportunities within these accounts.
How Often Should I Review My Retirement Investment Portfolio?
As you progress towards retirement, regularly review, and rebalance your investment portfolio to align with changing goals, risk tolerance, and market conditions. Rebalance by selling over-performing assets and reinvesting in underperforming assets to maintain your desired asset allocation.
When seeking guidance on retirement investments, it is crucial to align your strategy with your retirement goals, risk tolerance, and asset allocation preferences. Consider a balanced approach that combines growth-oriented investments with income-generating assets, and explore options such as stocks, bonds, mutual funds, ETFs, real estate, and tax-advantaged retirement accounts.
Regularly review and rebalance your portfolio to adapt to changing market conditions and ensure it remains aligned with your financial objectives.
Reach out to our office to speak with our highly qualified financial advisors who can provide personalized recommendations and assist you in navigating the complexities of retirement planning, whether you’re just starting out, or are ready to ensure you’re set up for a financially stress-free impending retirement
About the Authors
Alexander Langan, J.D., CFBS, is the Chief Investment Officer at Langan Financial Group. In this role, he manages investment portfolios, acts as a fiduciary for group retirement plans and consults with clients regarding their financial goals, risk tolerance and asset allocation.
With a focus on ERISA Law, Alex graduated cum laude from Widener Commonwealth Law School. He then clerked for the Supreme Court of Pennsylvania and worked in the Legal Office of the Pennsylvania Office of the Budget, where he assisted in directing and advising policy determinations on state and federal tax, administrative law, and contractual issues.
Alex is also passionate about giving back to the community and has helped establish The Foundation of Enhancing Communities’ Emerging Philanthropist Program, volunteers at his church, and serves as a board member of Samara: The Center of Individual & Family Growth. Outside of work and volunteering, Alex enjoys his time with his wife Sarah and their three children, Rory, Patrick, and Ava.
Reid Ruark currently serves as an Associate Investment Advisor at Langan Financial Group where he assists Alex in managing investment portfolios, prepares client reviews, and helps operate social media platforms. In his free time, Reid enjoys spending time with his wife, playing pickleball and connecting with members of the community.
About Langan Financial Group
Langan Financial Group is an independent financial planning firm located outside of Harrisburg, Pennsylvania. Established in 1985, Langan Financial Group offers a broad range of financial planning services. With an open architecture platform, our advisors have access to a diverse range of products, free from any sales quotas. Our team of financial experts, each with unique specialties, enhances our ability to deliver value to clients.
Disclosures
The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information.
