Planning Trumps Portfolio In Retirement
Contrary to popular opinion, you are likely to make more money for retirement with
the proper financial planning, as opposed to putting more stocks or other similar investments into your portfolio. In the case of retirees who want to bounce back from losses brought about by the economy, implementing strategies that lower your overall tax burden can be as effective (if not more beneficial) in preserving wealth and giving you more liquidity than upping the risk of your portfolio.
You can also plan to work part-time or full-time when you are supposed to be retired, or put retirement on hold for some time. Normally, it will not take too long or be too hard to significantly increase your retirement funds if you do so. For instance, a portfolio previously valued at half a million dollars may have taken a dive and devalued by $100,000. If you work part-time and earn $5,000, those earnings can take the place of the lost $100,000 in assets, and replace that loss when you look at it in terms of spending power.
Your future financial security can highly benefit by taking a look at the planning opportunities available to you, and not just the investment or savings options you have access to. Focusing on your portfolio and its contents to increase your earnings is not always a good thing, because you could miss out on opportunities to plan more, preserve your funds, and put away more money for your nest egg. For example, having your mortgage refinanced with the comparatively low current rates can save you a huge chunk of cash so you will not have to change your retirement lifestyle as much. Being able to cut down your mortgage payments by $500 per month may again make up for the $100,000 devaluation of your portfolio. That simple change to your financial planning can give you an extra $500 to help fund the lifestyle you are accustomed to.
The first instinct for many investors who want to make more money towards a bigger nest egg (or seniors who want to recover from bad investments and the associated losses) is often to take on more risk and put money into speculative investments. Before you do so, remember that planning trumps reshuffling your portfolio, as there are a lot of relatively easy, low-risk ways to make more money for your retirement without buying into stocks or bonds at the onset or upping portfolio risk beyond manageable amounts.
by: Katherine Smith
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