Small port­fo­lio moves for your re­tire­ment years

The Covington News - - Business -

For most of your work­ing years, your in­vest­ment strat­egy, by and large, has prob­a­bly re­volved around achiev­ing suf­fi­cient growth to help you meet your long- term goals, such as col­lege for your kids and a com­fort­able re­tire­ment. But once you have re­tired, you can’t just sit back and put your in­vest­ment port­fo­lio on “ au­topi­lot.”

What types of port­fo­lio moves should you make as a re­tiree? Here are a few pos­si­bil­i­ties:

• Gen­er­ate your own pay­check. When you’re re­tired, you can col­lect So­cial Se­cu­rity and re­ceive dis­tri­bu­tions from your 401( k) and IRA. But you’ll also prob­a­bly need to gen­er­ate some in­come from your in­vest­ment port­fo­lio. Con­se­quently, you’ll need to own the ap­pro­pri­ate mix of in­vest­ments, in­clud­ing stocks that have the po­ten­tial to pay div­i­dends, bonds and cer­tifi­cates of de­posit ( CDs).

• Pro­tect against in­fla­tion. Even if you use some of your in­vest­ments to pro­vide an in­come stream, you can’t ig­nore the need for growth — be­cause you’ll have to con­tend with in­fla­tion. Con­sider this: Ev­ery­thing you buy to­day will cost about twice as much in 25 years, as­sum­ing a 3 per­cent an­nual in­fla­tion rate. In other words, if you need $ 75,000 a year to re­tire com­fort­ably now, you’ll need about $ 150,000 per year in 25 years to main­tain your stan­dard of liv­ing. And with ad­vances in med­i­cal treat­ments lead­ing to longer life spans, it’s en­tirely pos­si­ble that you could spend 25 years — or more — in re­tire­ment.

To fight in­fla­tion, then, you will need at least some ex­po­sure to stocks, which of­fer the po­ten­tial to help you keep pace with in­fla­tion. While it’s true that by in­vest­ing in stocks, you can lose some, or all, of your prin­ci­pal, you may be able to re­duce your risk level by buy­ing qual­ity stocks and hold­ing them for the long term. You can also help pro­tect your­self against in­fla­tion through other in­vest­ments. Your fi­nan­cial ad­vi­sor can help you choose the ones that are ap­pro­pri­ate for your needs.

• Leave a legacy. As you may know, the es­tate tax laws are in flux. In 2008, the es­tate tax ex­emp­tion amount — the amount you can pass to your heirs free of es­tate taxes — is $ 2 mil­lion. This fig­ure rises to $ 3.5 mil­lion in 2009. Then in 2010, the es­tate tax dis­ap­pears — for one year only. And un­less Congress changes the laws be­fore then, in 2011 the ex­emp­tion amount will re­vert to $ 1 mil­lion, with a max­i­mum es­tate tax rate of 55 per­cent.

How can you help your fam­ily cope with a po­ten­tial es­tate tax bur­den? You can make some “ tac­ti­cal” moves, such as rolling your 401( k) into an IRA, which, when passed on to your heirs, could be “ stretched” for years to re­duce the tax bite. You can also re­duce the size of your tax­able es­tate by mak­ing gifts to fam­ily mem­bers and char­i­ta­ble or­ga­ni­za­tions.

Clearly, there are many port­fo­lio con­sid­er­a­tions for re­tirees. So when you’re near­ing re­tire­ment, start pre­par­ing. By mak­ing the right moves, you can help make your “ golden years” con­sid­er­ably brighter.

Rick Rogers

In­vest­ment Rep­re­sen­ta­tive

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