Upticks: Simple Ways to Invest Your Money After You Retire
By Luke Sullivan on March 13, 2025
After retirement, investing may seem daunting. Especially if your account values start decreasing after years of increase. Jake and Cory explore simple ways to invest your money post-retirement by understanding the importance of risk tolerance, common pitfalls, and straightforward strategies. Learn the role of cash flow and how to weather market volatility. Investing in retirement might just be easier than you think!
Click here to subscribe to our newsletter!
Click here to contact us!
Click here to order ‘Retiring Right’!
Read an overview of the conversation below:
Understanding Risk Tolerance and Capacity
One of the fundamental aspects of investing in retirement is understanding your risk tolerance and capacity. Cory emphasizes the importance of aligning your investment portfolio with your financial plan. He explains that risk tolerance refers to your emotional comfort with market fluctuations, while risk capacity is more objective and based on your financial situation. Jake adds, “Market volatility matters more when you’re distributing or spending your wealth, rather than accumulating it.” Therefore, it’s important to have a well-constructed financial plan that takes both risk tolerance and capacity into account.
Avoiding Common Pitfalls
Don’t base investment decisions on what others are doing: Your asset allocation should be based on your actual need for the money and when it’s going to be spent. Cory says, “Don’t make investment decisions based upon what other people around you are doing. It’s crucial, particularly when we’re talking about investing in retirement.”
Don’t assume your asset allocation should be based on your age: Instead, it should be aligned with your financial plan and cash flow needs. Jake points out, “Your asset allocation should be based upon your actual need for the money and when it’s going to be spent, whether or not you’re working.”
Avoid cookie-cutter products: Customization is key, but it doesn’t imply complication. Your investments should be tailored to your specific financial goals. Jake mentions, “A retiree has more of a need for customization than a pre-retiree. Customization does not imply complication.”
Simple Investment Strategies
Have at least five years’ worth of retirement spending not in the stock market: Ideally, this should be ten years. This helps ensure you can weather market volatility without impacting your cash flow. Jake explains, “At a bare minimum, we want to have at least five years’ worth of retirement spending not in the stock market. Ideally ten, but a minimum five.”
Consider a portfolio that generates income from dividends and interest: This way, you can live off the income without touching the principal. This strategy pairs with a well-constructed portfolio and a willingness to adjust spending if necessary. Jake shares, “If we can build a portfolio that generates $60,000 a year in dividends and interest, what the principal does day to day, month to month, year to year, decade to decade, doesn’t matter because this client knows they’re not touching principal.”
The Importance of Professional Guidance
While it’s possible to manage your investments on your own, Jake and Cory highlight the potential benefits of working with a professional. A good advisor can help you make unemotional, math-based decisions and help align your portfolio with your financial plan. They can also provide ongoing management, monitoring, and adjustments as your financial goals and market conditions change. Jake notes, “A good advisor would say, ‘Okay, Mr. And Mrs. Client, I hear your emotional piece, but what risk capacity should be married with that risk tolerance?’ And that to me is a well-constructed financial plan.”
Managing Market Volatility
Don’t use market fluctuations to adjust your strategy: Your financial plan and investment strategy should be built knowing you’re going to have good and bad markets. Jake says, “Your financial plan and investment strategy should be built knowing you’re going to have good and bad markets. It’s too late to adjust when the market goes down.”
Rebalance your portfolio: During market shifts, it’s important to rebalance your portfolio back to your target allocation. Jake explains, “The best thing you could do during market volatility is just make sure your account is balanced according to your plan.”
Practical Examples
Aligning investments with spending needs: Jake shares, “If you’re going to pull $5,000 a month from your account, that’s $60,000 a year times five years is $300,000 at a bare minimum, not in the stock market. That’s what we’re talking about when we talk about risk capacity.”*
Living off dividends and interest: Jake mentions, “If we can build a portfolio that generates $60,000 a year in dividends and interest, what the principal does day to day, month to month, year to year, decade to decade, doesn’t matter because this client knows they’re not touching principal.”*
*Scenarios for illustration purposes only
The Role of Cash Flow and Market Conditions
Understanding and managing cash flow is important for retirees. Jake and Cory emphasize having a clear picture of your monthly expenses helping align your investment strategy with your cash flow needs. Jake explains, “We’re looking to replace a paycheck here. We’re not just trying to make you the most amount of money. We’re really switching that return objective. You still have a return objective, but what’s equally important is cash flow and income.”
They also discuss how market conditions can impact your investment strategy. Jake notes, “If you just have all your money in some cookie-cutter index fund and the market pulls back 4% or 5%, that’s a problem.” Cory adds, “Don’t make investment decisions based on market fluctuations. Your financial plan and investment strategy should be built knowing you’re going to have good and bad markets.”
Investing in retirement requires careful planning and ongoing management. By understanding your risk tolerance and capacity, avoiding common pitfalls, and implementing simple investment strategies, you can navigate the complexities of retirement investing. Diversification and professional guidance play important roles in helping ensure your investments are aligned with your financial plan. Regular reviews and adjustments to your financial plan are just as essential to stay on track.
Thank you for tuning in, we hope you have a great week!
