We often focus on investing to get to retirement. But once you’re there, how can you prolong your retirement portfolio?
While you may already be making efforts to save in retirement, or for retirement, it?s not easy to put aside a specific portion every time, especially if you?re the head of a family. The economic downturn can also affect the amount you save, so it is important to create a safety net that lasts for a lifetime.
How can you ensure a steady stream of funds during retirement without being overwhelmed? Most financial advisors will recommend creating a portfolio, which is the right approach ? but it?s only the start of the battle. ?The actual thing(s) that matters in the end are tax minimization, diversification and capital preservation.
3 Tips to Increase the Lifespan of the Retirement Portfolio
1.? Delay Social Security Benefits and be Tax Smart
Market Watch featured a study survey conducted among 15,000 consumers and the results revealed that the average U.S. citizen would run out of job-related pensions and retirement funds after 14 years of retirement. However, saying no to receive Social Security perks can help to increase the lifespan of your funds. This is because using personal savings in early years of retirement can extend the portfolio.
Another possible good reason to delay your Social Security maybe to prevent higher taxes from being levied against the withdrawals made from your personal IRA savings account. If you receive Social Security and you wish to withdraw from your IRA at the same time, then this can potentially increase the tax burden, especially if the withdrawal places you in a higher tax bracket. For example, let?s say a retiree receives $X per annum from their Social Security benefits and they decide to withdraw $Y dollars from their IRA simultaneously. This individual will in essence have to withdraw more funds from their IRA just to cover the additional taxes than if they were not receiving Social Security at all.
2. Aim for True IRA Asset Diversification
True diversification involves making an investment strategy that includes a variety of different assets classes including stocks, bonds, gold, silver, oil & gas and real properties. Establishing a property IRA is one alternative way that can be arranged even with your current IRA assuming that it is hosted with a self directed custodian. A property asset rich retirement account is also subject to the same deferred tax benefits under the rules, as is a traditional IRA. However, it is recommended that you first seek assistance from a competent legal source or advisor to help guide you, teach you the pros and cons of alternative IRA investing and to help prevent you from committing or participating in a prohibitive IRA transaction.
Investing in multiple market sectors simultaneously generally helps balance your portfolio and help further safeguards your savings from extreme market fluctuations. The goal with portfolio management is to reduce the potential downsides within your portfolio by properly balancing your portfolio when the market fluctuates with unaffected or well performing assets. Within a section of your portfolio, you might choose a corporate (triple-A) and government bond for a fixed stream of income along with some Fortune 500 stocks, especially from those companies that have demonstrated sound growth over the several past recent quarters.
3.?Preserve Capital and Avoid Extreme Risks
Depending on your risk tolerance, age and other conditions, you may want to avoid investing in individual stocks that maybe considered volatile due their frequent prices fluctuations. Also, individual equities should only make up less than 5% of the retirement portfolio because may also be considered volatile.
When the portfolio is going to hold investments that have less volatility, it may well help you to preserve your future capital and enjoy sustainable returns on your nest egg for the rest of your life. Moreover, it is not necessary to invest in established companies. New startups, especially in the energy and technology sectors are turning out to be viable options for personal retirement dollars.
How do you plan to prolong your retirement portfolio? Feel free to leave comments.
I am hoping to have options for tax diversification in retirement by having both Roth and regular retirement accounts so that I can take advantage of the marginal tax rate system.