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Manage your savings during retirement with income investments

POSTED: November 14, 2008 5:00 a.m.

You’ve spent many years planning for retirement and since that time is finally near, you may wonder where to invest your money and whether or not your savings will last throughout retirement.  Many newly retired investors think switching to a conservative investment approach is best.  However, the growth of your savings after retirement is just as important as when you first started saving.

According to the most recent information from the Social Security Administration, the average retirement age is 64.  The National Center for Health Statistics indicates that men have an average life expectancy of age 75 and women have an average life expectancy of age 80.  Since both men and women can expect to live many years after retirement, it’s important to keep retirement savings growing so your savings will last throughout retirement.  

Making the wrong investment choices could endanger your long-term financial security.  That’s why it’s important to seek advice from a qualified professional. A professional can help you determine the best way to manage your portfolio during retirement, including re-evaluating your investment strategy and selecting a practical amount of income to withdraw each year.  

What investment strategy should I consider?
Many financial planners suggest new retirees stay with a diversified asset mix that includes a substantial percentage of stock investments. This is important because over time, inflation can have a crippling effect on retirement savings. For example, even at a relatively low 3 percent annual inflation rate, a $40,000 retirement spending goal today will become a $54,000 retirement spending goal in 10 years.  

Although stocks and stock mutual funds are riskier than other investment types, these investments can increase your potential for portfolio growth and help counter the effects of inflation.

Develop a plan to spend investment assets
New retirees should focus on developing a plan for spending investment assets. When determining the amount of money to withdraw from your retirement plan each year, consider your goals. For example, do you want to leave an inheritance or conserve assets for later in retirement?

Choose a practical annual draw (the amount you decide to withdraw each year) and be prepared to change that amount as your investment returns fluctuate. For example, if you experience good investment results early in retirement, you may decide to spend more. But if the market declines, you may need to take less from your portfolio to conserve assets for later.

Even during retirement your investment choices are as important as when you first began to save. Keeping a diversified portfolio that will grow faster than the rate of inflation and choosing a practical amount for an annual draw will help preserve your assets for many years. Talk to a Cotton States agent for help in determining an investment plan tailored to meet your retirement needs.

1.  Social Security Administration, Annual Statistical Supplement, 2006, Master Beneficiary Record, 100 percent data, Table 6.B3.
2. National Center for Health Statistics, National Vital Statistics Reports, Vol. 55, No. 19, Aug. 21, 2007.
3  Investment management, retirement, trust and planning services provided by COUNTRY Trust Bank,®  a part of COUNTRY® Financial, Bloomington, Ill.  Products of COUNTRY Trust Bank are not FDIC insured, not guaranteed and may lose value.

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