Once you are in your 60s, you are likely to focus less on growing your retirement funds than answering, "When do I retire?" And once you crack open your nest egg, how should youallocateits contents? The answer often lies in a substantial shift in your investment strategy. Here are some ideas for investing in your 60s and beyond.
Preliminary Questions
Before you settleona plan, you need to be able to answer a few questions. These include:
How long do you need your savings to last, and how long are you likely to live?
How many years might you be in retirement?
What are your expected annual expensesinretirement?
What is your non-invested income, such as pensions, Social Security, and annuity payments?
By having an idea of how much you need in retirement and how much income you may expect to receive outside of your investments, you then calculate how much you need to withdraw from your retirement funds.
Allocating Your Retirement Assets
Everyone's safety threshold is different—but most people appreciate having a balanced portfolio of CDs and high-yield savings accounts with stock holdings. However, a too-conservative portfolio may not earn enough to outpace inflation, while a too-aggressive portfolio might leave you vulnerable to sudden market drops.
There are a fewdifferent waysto approach this. One of the most popular ones is the "glide path" strategy.1Subtract your age from 100, and that is the proportion of assets you should have in stocks. So, for example, a 40-year-old would want at least 60% of their portfolio instocks;ia 70-year-old would want no more than 30% of their portfolio in stocks. Theremainderof the portfolio's allocations mightbe tobonds, CDs, money-market accounts, or other assets.
Planning Withdrawals from Your Accounts
Once youbecome a certain age, you are subject to the required minimum distributions (RMDs).2These are annual minimum distributions you must take from a traditional individual retirement account (IRA) and 401(k) plans.The age that RMDs beginis73However, you can delay taking the first RMD until April 1 of the following year.If you reached 73 in 2024, you must take your first RMD by April 1, 2025, and the second RMD by Dec. 31, 2025.iiBecause RMDs increase your taxable income, many approaching 73mightbenefitfrom working with a financial professional to manage their tax liability or reallocate withdrawals into other accounts.
But before RMDs become an issue, you may still need to make regular cash withdrawals from your retirement accounts. Someaccomplishthis by withdrawing a flat 3% of theirinitialbalance each year, adjusting for inflation. Depending on the investments in the portfolio, these modest withdrawals maymaintainorpermityour portfolio to grow from year toyear.iii
Whatever system you choose, it is important to be consistent. However, if a particular method is not working for you, switching to something that does is fine. A financial professional may help you evaluate where you are, discuss your goals and expectations, and design a plan to help manage resources.
Important Disclosures:
The opinions voiced in this material are for general information only and are not intended toprovidespecific advice or recommendations for any individual. Todeterminewhich investment(s) may beappropriate foryou, consult your financial professional prior to investing.
Investing involves risks includingpossible lossof principal. No investment strategy or risk management technique can guarantee return oreliminaterisk in all market environments.
This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issueswith a qualified tax advisor.
All information is believed to be from reliable sources;howeverLPL Financial makes no representation as to its completeness or accuracy.
This article was prepared byWriterAccess.
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