At retirement the habits of accumulation, honed over a lifetime, must change. Retirement is when one begins to live on investment income and, perhaps, on principal as well. That may entail a gradual change in investment strategy. As we counsel those approaching retirement, we generally cover these themes:
 
  • Consider your long-term perspective. Your retirement may last for 20 or 30 years, perhaps even longer. During that time inflation is bound to be a problem from time to time. To reflect that fact, your portfolio should continue to incorporate growth elements.
  • Balance your risks. Investors learned all too well in recent years that markets can go down as well as up. Careful diversification among and within asset classes can reduce an investor’s overall risk exposure.
  • Pay attention to taxes. Are you managing your investments in a tax-efficient manner? Are you taking advantage of the low tax rates applied to most corporate dividends? In your tax bracket, do tax-free municipal bonds make sense? These are just a few of the questions that retirees need to wrestle with, and we can help.
  • IRA Rollovers. If you will be receiving a lump sum distribution from a 401(k) plan or other employer-provided qualified retirement plan, you have some important tax planning ahead. You can defer income taxes, often for many years or even decades, by rolling the lump sum into an IRA.
Most retirees will find an IRA rollover to be to their financial advantage. Should you decide to take this approach, arrange for a trustee-to-trustee transfer to avoid the 20% withholding tax that otherwise applies to lump sum distributions.
 

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