How to invest your savings once retirement is achieved?
Landing in retirement does not, much less end with beneficial practices such as financial planning. Retiring implies ending with what is probably the most ambitious and important saving objective in a person’s life: retirement planning. A process that ideally begins when the labor market is accessed and that will extend for decades. But after that adventure, begins to manage the estate during retirement. A cause of maximum importance, especially in an environment of increased life expectancy and with the unknown how long we will need to manage the savings or, ultimately, how long we will live.
One of the risks that retirees should put more eyes on is the one known as “longevity risk”. This risk consists of surviving the savings, a situation that can undoubtedly generate embarrassment and anxiety. And it is something that can tend to increase, as we live more and more years (the life expectancy at mid-century could be around 90 years) and that, paradoxically, every time we retire before although the ordinary retirement age it is gradually moving from 65 to 67 years.
How to manage retirement savings?
Based on current life expectancy, a retiree must manage their savings for a period of approximately 15 to 20 years. It is important to measure the savings to cover the needs throughout this period and not fall into the temptation to dispose of it suddenly for unnecessary expenses. This is one of the reasons why it is recommended to recover the savings in the form of monthly rents that make it possible to supplement the public retirement pension and not in the form of capital. Another issue that we must bear in mind is that inflation does not rest in our retirement. That is, the savings must be correctly invested with the objective of, at least, beat the annual increase in prices. Otherwise, we will be impoverishing.
What strategy can be taken?
Well, obviously, include small percentages of risk assets with that part of the savings that we will not need in the short term and that will seek to compensate for the lack of profitability or the low profitability that conservative assets will offer. The portfolio could be distributed in this way:
- Saving that we will need in the next 3 years: in liquidity, without assuming any type of risk.
- Savings that we will need in the next 3 to 5 years: invested in fixed income of a conservative nature or in mixed funds with a small percentage of variable income.
- Saving that in no case we will need before 5 years: invested in mixed funds with a greater component of variable income.
- Consider obtaining 2020 Medicare advantage comparison which are listed on http://www.medicareadvantageplans2020.org