Choosing A Post-Retirement Stock Portfolio
As a growing number of retirees are discovering, having an income after retirement is becoming more important than ever before. People are living longer than they ever have, and that is increasing the length of retirement. 401(k) accounts and other employer-sponsored retirement plans are frequently underfunded, which means many retirees face running out of money during the years when they’ll need it most.
As this new reality has taken hold, a strategy of continuing to generate income after retirement – rather than relying on savings alone – has emerged as one of the most practical solutions.
One of the best ways to generate post-retirement income is with stocks. But not just any stocks will do. The ones that will best serve those who have already retired are different than the ones that should be chosen for growing a savings and/or retirement account earlier in life.
Stocks With Dividends
Choosing stocks that pay reliable dividends is not a new idea, but they are becoming increasingly attractive and important for those looking to generate post-retirement income.
While riskier investments in high-growth stocks (tech stocks are a prime example) can help grow a retirement account early in life, they’re a poor choice for those who are ready to retire or already retired.
While dividend yield is tied to stock price, meaning it can change over time, they are still fairly easy to predict. This means retirees won’t be left guessing at the last minute before a dividend check is sent out.
Exchange traded funds (ETFs) and mutual funds built on stocks combine large amounts of stocks into one fund. It’s like creating an entire portfolio while only purchasing one fund.
Funds are a great way for retirees to create a balanced portfolio, but before picking one it’s important to understand fees. Because somebody has to decide which stocks belong in those funds, there will be an administration fee. Some funds charge a lot, and others don’t.
Retirees should have products in their portfolios other than just stocks. Bonds and bond funds should have a significant presence and for the more sophisticated investor. Real estate and other alternative investments might be worth considering as well.
The more complicated the investment types, the more skill and experience your financial planner should have.
Making It All Work
A lot of factors will need to be taken into account when trying to decide what the best solution is for generating income post-retirement. If possible, retirees should consult with a reputable financial planner who can evaluate their unique financial situation and make a recommendation that meets their needs.
At Miles Brown Asset Management, we always put our client’s financial and lifestyle goals front and center, and work hard to craft a financial strategy that enables those goals, rather than working backwards from a set budget that dictates what kind of lifestyle a person can have.
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