Each day in the U.S., 10,000 individuals turn 65, and the number who cross that threshold will exceed 88 million, or about 20% of the U.S. population, by 2050, AARP International predicts based on data from the UN Population Division.
Age 65 is an important milestone for many American workers because it’s when many file for Medicare coverage (at least Part A) and contemplate retirement. Health care coverage is just one among several key topics to tackle when it comes to retirement. For many, other topics are top of mind, such as where to live, how to manage cash flow, how to manage sticky inflation and how to manage investments during retirement.
In fact, according to BlackRock’s 2022 “Read on Retirement” survey, 64% of workplace savers are concerned about having enough funds to last throughout their retirement, and 80% want help from their plans to get through their retirement years, not just reach retirement.
If you are thinking about your plans for investing in retirement and beyond, here are 10 strategies to consider:
- Take inventory of your spending needs.
- Avoid fear-driven or emotional decisions about investments.
- Make sure your portfolio is sufficiently diversified.
- Aim for tax efficiency in your portfolio.
- Consider annuities for income protection.
- Mitigate sequence-of-return risk.
- Hold cash reserves for emergencies and short-term goals.
- Consider hiring a financial planner.
- Hold enough equities in your portfolio.
- Manage your estate.
Take Inventory of Your Spending Needs
Fidelity suggests savers may need to budget for 55% to 80% of their pre-retirement work pay to cover a variety of expenses throughout their retirement, depending on things like income, lifestyle preferences and health care costs. For many, Fidelity estimates that about 15% of their retirement expenses will be related to health care costs of some kind. Below are some income-replacement parameters from Fidelity:
| ANNUAL INCOME RANGE AT RETIREMENT | ESTIMATED RETIREMENT-INCOME REPLACEMENT |
| Less than $50,000 | 80% |
| $50,000 to $80,000 | 75% |
| $80,000 to $120,000 | 70% |
| More than $120,000 | 55% to 65% |
Avoid Fear-Driven or Emotional Decisions About Investments
The urge to switch course on investment allocations can be strong at times. Take, for example, when the benchmark mix of 60% equities and 40% bonds plunged by 17% in 2022, according to data from Bloomberg. A balanced allocation of this nature is common among retirees.
Market volatility is common, and is often temporary, too. Based on rolling returns of stocks between 1928 and 2022, investors saw positive returns 88.2% of the time during five-year periods and 94.9% of the time during 10-year periods, BlackRock reports. So, the longer you stay invested, the greater the likelihood of gains.
“Staying invested and riding out the market declines result(s) in a better outcome than selling at the market low.” – Brian Severin, senior executive vice president, Mutual of America Financial Group
Some investors miss out on long-term, positive returns because they abandon their investment strategies in times of turmoil. But J.P. Morgan estimates that if an individual maintained her investment of $10,000 in the S&P 500 from Jan. 1, 2003, through Dec. 31, 2022, her balance would be $64,844. But what if she missed out on just 10 of the best days in the market? Her ending balance would be diminished to $29,708, a loss of more than $35,000 in earnings.
“Panic-driven decisions, like selling investments based on short-term market volatility, are not a good solution. For example, in 2022, inflation was raging, and the S&P 500 declined about 20%, but since last October, the index has been up more than 20%. So, staying invested and riding out the market declines resulted in a better outcome than selling at the market low,” says Brian Severin, senior executive vice president and chief marketing officer for Mutual of America Financial Group.
