Anthony Benante, CFA, is quoted on this topic, answering a reader’s question on NJMoneyHelp.com by Karin Price Mueller, “What are good investments for after you retire?”, originally published on December 5, 2023.
A 90-second read by Anthony Benante: Investment decisions in retirement depend on your specific situation. Different investments can have different objectives. Growth assets can include traditional equity investments, while Stability assets tend to include bonds and certificates of deposit, and finally, Diversification assets can include natural resources, real estate, and non-traditional investment strategies. Determining which investments and the best mix of those investments depends on what you want your investments to do for you in retirement. Creating a financial plan can help.
To start, review your financial needs in retirement, usually determined by a spending plan or budget. Consider how long your spending plan will be, and do not forget to add in inflation adjustments over time.
Take inventory of your resources, both current and future. Current resources can be things like an emergency fund, banking accounts, investment accounts, retirement accounts, home equity, and other assets. Future resources can be things like Social Security, pension payments and other retirement income.
Compare your financial needs with your resources over the life of your plan. Do you have an expected surplus of resources or shortfall, considering different market environments and economic cycles?
If your resources are sufficient, the investment choices may be based on your willingness to take risk. A conservative person, in this situation and within the context of a diversified portfolio, may choose to include more conservative investments like bonds, certificates of deposit (CDs), Treasury Bonds, Treasury Inflation Protected Securities, etc. Someone with higher risk tolerance in this circumstance, again within the context of a diversified portfolio, may consider including more assets with expectations for growth, like equities.
If your resources do not cover your expected spending needs, you will have to evaluate your spending plan versus the costs and benefits of adding more growth or equity investments to your diversified portfolio. When equity markets are performing well, adding growth assets may help you better achieve your goals. But if investment performance is poor, you may deplete your investment account sooner since you may also be withdrawing to meet your spending goals.
Ultimately, a diversified mix of investment choices that helps make your money last through retirement, while considering changing economic and market cycles, is the objective.
If you have any questions, please reach out to your Baron Team.
Disclosure: This is a general communication being provided for informational purposes only. Past performance is no guarantee of future results. Every investment strategy has the potential for profit or loss. This material is not intended to be relied upon as a forecast, research, tax or investment advice.