Getting Close to Retirement? Accentuate the Positive

If you know you’ll be retiring in the next year or so, it’s time to start thinking about tactical moves you can make to get your assets into the best possible position before you begin to rely on them to replace your employment income. It’s important to do this a few years out from retirement, because it gives you the flexibility to make changes for the better.

Inventory Your Assets

You’ve been tracking with savings and getting your statements – but pulling all the accounts together and really understanding what you have can be a good exercise. Look across all your accounts, and your spouse or partner’s too:

• Taxable investing and savings accounts, including your emergency fund
• Any inherited accounts
• Retirement accounts – if you have multiple 401(k)s from previous employers, be sure to include them all

There are tools available online that can help you track all these accounts if you’re so inclined, but all you need is a basic spreadsheet or even just handwrite it – the idea is to create a snapshot of what you have. Break down your balances into stocks, bonds and cash (if you own a fund like a target date that mixes them you’ll need to look up the fund report). It’s easiest to do it by dollar value.

Once you have them all, figure out the total amount of each category as percentage of your total assets. Looking at your investment picture this way can sometimes be surprising – asset allocations drift over time, and when you add in cash it changes your risk profile.  You may find that you are off target for whatever you’ve determined is the right profile for you.

Maximize Retirement Savings

Now that you know your total assets, you can make some informed decisions. Are you tracking to where you think you should be? Can you retire earlier, or do you need to think about working for a few more years? If you’re on track, it’s still worthwhile to continue to contribute to retirement savings. If you’ve already contributed the maximum but have additional money left over – which many people are finding they do this year – either contribute it to an existing IRA or just set up a regular investment account. The idea is to get that money working for you and not leave it in savings.  It’s also a good idea to revisit your emergency fund and see if it matches your expenses – you may be saving more than you need at this point in your journey, and you can shift the extra to an investment account.

Make the Yield Shift

You’ve probably been using the fixed income allocation in your portfolio to balance out your risk profile with your equity allocation.  As you’ve gotten closer to retirement you may have been boosting this allocation to keep your risk low – but with interest rates at the zero bound and likely to stay there, this risk tuning is costing you yield. And at this point in your financial journey, it matters because you don’t have as much on the growth side of your portfolio allocation. Consider other sources of yield: high yield bonds, municipal bonds, alternative assets such as real estate or private debt.

It’s Time for a Check-Up

If you intend to manage your money yourself during retirement, or you like the convenience of online automated investing, it’s still worthwhile to get some professional advice. The old saying “You retire once; a financial advisor retires every day” is true. Whether you want ongoing advice or a one-time plan, it’s a good idea to have some informed guidance before you make moves that can be difficult to course-correct from.

The information contained herein is intended to be used for educational purposes only and is not exhaustive.  Diversification and/or any strategy that may be discussed does not guarantee against investment losses but are intended to help manage risk and return.  If applicable, historical discussions and/or opinions are not predictive of future events.  The content is presented in good faith and has been drawn from sources believed to be reliable.  The content is not intended to be legal, tax or financial advice.  Please consult a legal, tax or financial professional for information specific to your individual situation.

This content not reviewed by FINRA