Portfolio Advice Many of You Need to Hear


Financial Advisor, Financial Security, Investing, Retirement


October 08, 2020

Retirement should be a time to relax and live your life on your terms. But I know for many of you it can be stressful to figure out a strategy for how to invest and how much you can safely withdraw from your accounts each year.

A new report that studied how people were investing and withdrawing IRA money in 2017 hints at a few ways older investors may be having trouble making the smartest moves.

It seems that one quarter of IRA accounts owned by someone at least 60 years old had 90% invested in stocks.

Whoa.

If you are sure you don’t need to rely on your IRA for income to pay your bills in retirement, owning a lot of stocks can make sense. For example, if your intention is to not use that money (other than taking required minimum distributions) and leave it to your heirs, then stocks make plenty of sense.

But that’s not the situation many of you are in. Please listen to me: If you will need to rely on your IRA for income to pay your living costs when you are retired then having 90% in stocks is way too risky. You want to have at least a few years of expenses sitting in cash or short-term high-quality bonds like Treasury bills.

The same report included another interesting piece of news. Among retirees who were required to take a Required Minimum Distribution (RMD) in 2017, only one-quarter withdrew more than their RMD.

As I explained in my new book, The Ultimate Retirement Guide for 50+, if you are worried about your money lasting through what may be a long retirement, sticking with the RMD amount may be a good strategy to consider. But I also want to make sure that you know that the RMD is not a written-in-stone rule for what you should withdraw. It’s simply the minimum the IRS requires.

If in fact you are able to cover all your living expenses from Social Security and a pension (and perhaps an income annuity) then you may be in a position where withdrawing more than the RMD is okay. I want to be clear— I am not suggesting you spend it all quickly! But I also do not want those of you who have saved a lot, and have your basic expenses covered, to deny yourself some extra income if it would bring you happiness.

Figuring it all out is tricky. Those of you who have read The Ultimate Retirement Guide for 50+ know that I think it can be smart at this life stage to hire a financial advisor to help you think through all your moving pieces. You don’t have to hire a planner or advisor to manage your money if you don’t want to. There are financial planners you can hire via an hourly or project fee to run the numbers and work up a retirement income strategy.

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