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Investment Strategies that Work for Your Retirement

One of the most confusing aspects to retirement accounts is their investment component. We frequently get questions about investment strategies and which are best for certain accounts.

While we can say that your investment choices should depend on your unique financial situation and will vary from person to person, there are certain investment strategies that will ensure that your pension portfolio yields the best results. However, most retirees fall into the bad habit of leaning their portfolios more toward annuities, high-yield bonds and dividend stocks – also known as “income investments.”

The problem with these investments is that, all too often, retirees mistake these strategy as portfolio diversification when in actuality it is merely providing current income, rather than capital growth. IN fact, with the market in the shaky place it currently is, you could end up suffering losses as an investor b just sticking with these strategies.

So what are you best investment strategies?

Your best bet is to invest your pension portfolio into broader assets. This way, you are not only earning income but your investments are growing simultaneously. This allows you to add another source of retirement income to your portfolio in the form of stocks, mutual funds and bonds that can be sold, rather than just getting your income from interest.

  • Follow the 50/50 Rule.

    Not precisely 50/50, mind you, but begin with a healthy mixture of bonds and stocks. Half of each is a general rule of thumb and may not be for everyone. The key to a good investment strategy is to mix your assets in such a way that they deliver returns high enough to increase your income but low enough to where your losses won’t drain your nest egg. To figure out what combination is right for you and your financial circumstances, sit down with a financial adviser. A trusted financial adviser can help you figure out what your risk tolerance is – that is, how much financial risk you can and should take.

  • Be sure to diversify your stocks and bonds.

    This is where a lot of individuals slip up; by focusing on stocks that produce above-average dividends and outsized yields. Here’s the problem with that approach: it leaves you vulnerable to economic weakness. On the other hand, focusing too much on dividend stocks can leave you vulnerable if certain industries fail. Diversify by investing in a total bond market and total stock market index fund, which will provide you with a portion of almost all publicly-traded U.S. stocks and bonds. This way you can lean your investments accordingly. As always, before you make any financial decision, you should talk to a professional who can tailor your investments to your unique needs.

  • Be mindful of your withdrawal rate.

    Your withdrawal rate can have a big impact on how long your funds last you. By setting a withdrawal rate that is high enough to provide an income but low enough to make sure your funds last you. A withdrawal rate of 3{bc669dfb3651bb8509a96034cbe7494d3a811fc0eedf0ddccb239fb9cb737439} or 4{bc669dfb3651bb8509a96034cbe7494d3a811fc0eedf0ddccb239fb9cb737439} – adjusted annually for inflation – should be a good range for most retirees.

The catch? Depending on how well your investments do, you may need to adjust that withdrawal rate. When it comes time to do so, you should sit with a professional to determine what rates will work best for you and how to go about adjusting it.

There Is No Right Way

The first step to investing your portfolio and yielding you the best rates is to recognize that there is no one right way to invest your money. The above should be considered as guidelines for portfolio investing. In order to figure out what is best for you, you should speak to someone about your unique financial needs and goals.

Retirement shouldn’t be one-size-fits-all. At the Storick Group, we have created this blog to help motivate our readers and followers to save for their futures. How you go about doing so is up to you…but we can help. Give us a call today to find out how!