I’m about to retire at 62. How should I structure my portfolio?

For many people, retiring is like crossing the finish line. You’ve spent your working years building wealth and now it’s time to manage and spend that money. This is generally true – your financial outlook will change significantly when you no longer have a normal income stream. However, it is important to remember that retirement involves many of the same concerns and focuses you’ve always had with your money, from tax planning, family budgeting and even inflation.

Asset allocation and portfolio composition remain as important in retirement as they were during your working years. And if you’re 62 and planning to retire soon, structuring your portfolio properly is key to ensuring your money lasts.

A financial advisor can help you build and manage your investment portfolio during retirement. Find and speak to a financial advisor today.

Continue investing for a balance between growth and security

Retirees in America can expect an average life expectancy in the 80s. This depends on several factors, but ultimately, if you are 62, you should expect to live another 20-25 years, and hopefully significantly longer.

This means you need to plan for the longevity and continued growth of the portfolio. One of the essential issues here will be finding a good balance between risk management and accumulation. You want to keep that money safe, but you don’t want it to spend the next 25 years languishing in a savings account, earning less interest than some investments can offer.

One approach, for example, is to divide your portfolio into sections or groups based on your wants, needs, and ability to grow. Calculate your monthly budget for necessities and plan to generate this income through safe assets such as bonds or annuities. Take another section of your portfolio and reserve it for your lifestyle – the money you want but could (literally) live without, and invest it in a more mixed collection of safe and growth assets.

Take the rest and put it into a more equity-focused long-term growth portfolio. This is your future money, the growth that will continue to build your wealth against future spending and inflation.

Whichever way you choose to structure your portfolio, the central issue is balancing your competing needs for security and growth. Use safer assets to pay the bills and use more speculative assets to build ongoing wealth, because retirement is not the end of your money management. It’s just the next phase of it.

If you need help choosing an asset allocation and portfolio composition that is appropriate for your age and risk tolerance, consider speaking with a financial advisor.

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Plan long-term costs

Thinking about retirement means thinking about longer periods of time than most families are used to. Instead of planning for the next few months, it’s time to plan for the years and decades to come. This means paying attention to long-term costs.

Among other issues, you will want to anticipate inflation. Even at the Federal Reserve’s 2% benchmark rate, inflation will double your cost of living every 35 years or so. Those living costs raises are one reason you should plan for the growth, not just the safety, of your portfolio. Your money needs to keep up with the rising costs of goods and services.

While you’re at it, don’t forget taxes. Unless you hold assets in a Roth portfolio, you will pay income tax on all your withdrawals. This is an easy asterisk to ignore, so don’t forget that $100,000 in distributions will mean living on more than $70,000 – $80,000 depending on where you live. Based on your tax situation and available cash, a Roth IRA Conversion can help you significantly mitigate these taxes.

Finally, there is the longest-term planning of all. You don’t necessarily have to start full real estate planning at age 62, at least not beyond the basic tasks that all adults should have in their desk drawer. But, it is something to prepare for. Sooner or later, you’ll want to create an estate plan, and as you structure your portfolio for growth and reductions, be sure to anticipate it.

Stay on budget

Your portfolio is a source of income, but it’s also important to control your expenses. So keep an eye on your household budget.

As you enter retirement, plan your family’s budget. How much do you spend? What do you need? What do you want? What kind of lifestyle do you want to have? All of these questions will be important as you move to a more fixed income, with fewer opportunities to get a raise in the coming years. As noted above, this type of budget is also essential for portfolio management. You will need to know your needs to understand how you can invest in growth and security.

As you do this, don’t forget to anticipate areas of new or rising costs – specifically, healthcare. You may need additional insurance, including gap insurance or long term care insuranceand this will add new monthly costs.

You may also have increased out-of-pocket healthcare costs. Hopefully these expenses won’t be billed immediately, but you should budget for more medical expenses as the years go by. That money will have to come from somewhere, and the sooner you plan, the better you’ll be able to pay it off. A financial advisor can help you anticipate these expenses and make a plan to pay them.

Conclusion

As you enter retirement, it’s important to start planning how your spending, budget and investments will change. Calculate your expenses and what type of investment you need to meet this budget, as the end of work does not mean the end of managing your money. The answers will help inform how you structure your portfolio and allocate your assets.

Retirement Portfolio Management Tips

• A financial advisor can help you build a comprehensive retirement plan. Finding a financial advisor doesn’t have to be difficult. Free SmartAsset Tool matches you with up to three vetted financial advisors serving your area, and you can have a free introductory call with your advisors to decide which one you think is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, start now.

• We spend so much time focused on how to save and invest for retirement that it’s easy to forget the importance of how you invest during retirement. This type of investment is fundamental, so it is important to learn how to do this.

• Keep an emergency fund on hand in case you have unexpected expenses. An emergency fund should be liquid – in an account that isn’t at risk of significant fluctuations like the stock market. The downside is that the value of liquid money can be eroded by inflation. But a high-interest account allows you to earn compound interest. Compare savings accounts from these banks.

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