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What Near-Retirees Need to Know About Investing Today

A lot changes when you retire. Your morning alarm might get pushed back, and your daily routine will certainly shift. You might become a little more cautious about how you spend your money and a lot more relaxed about how you spend your time. But what about your investments? Will those have to change? Should you become more conservative? Do you need to be watching the markets every day? How will the pandemic’s lasting effects change the economy over the coming years? And as the economy changes, should your investing strategy change too? The closer you get to retirement, the more investing questions you might have. Here’s some things to know about investing today.

Theres Still Room for Risk

It’s not a good idea to compare your investment strategy to those of your friends as you near retirement. Depending on your retirement targets, assets and current savings, you may have a higher risk tolerance than your peers. You may be able to take less risk than your friends, or need to take more in order for your financial plan to work. Everyone’s situation is different, so comparing portfolio performance can be misleading.  

Don’t assume that approaching retirement means it’s time to reduce your risk across your entire portfolio. Remember, you’re going to need to keep generating wealth to last potentially 30 years or more that you spend in retirement, so downshifting into a low-risk strategy could threaten your position in 15 or 20 years. Maintaining the growth that comes from stocks will be key to outpacing inflation over time.

Holding Steady is Sometimes the Right Move

As they approach retirement, some investors believe that this new phase of life necessitates a new approach to investing. Because they’re about to switch from earning a paycheck to living off of their earnings, they assume that means it’s time to change the way they invest.

Sometimes doing nothing and trusting your predetermined plan is the right thing, even as the markets fluctuate. Your financial plan should incorporate the various changes throughout your life, and dictate your investment strategy during them all. Retirement is not a date on which a switch is flipped from one investing strategy to another.

Never Forget Emergency Savings

When COVID hit, huge numbers of investors had to do something they never wanted to do: Take early distributions from their retirement accounts. They were largely able to do so without immediate penalties, thanks to the CARES Act, but that need for emergency cash could have expensive tax consequences for investors who aren’t able to return that money to their accounts. Plus, they may have less cash to count on when they do retire.

The pandemic has been a harsh reminder about the importance of planning for the unexpected. Being too forward-focused can be a detriment if it causes you to discount your more immediate needs. As you’re thinking about 10 to 15 years in the future, make sure you’re not leaving yourself unprepared for emergencies in the much nearer future. 

We typically recommend having around six to nine months of living expenses in an emergency fund, just in case. This should be as accessible as possible, so you’d want to keep it in a savings or money market account. (CapitalOne 360 has a Performance Savings Account that typically has one of the best interest rates you can get for short-term funds like this; your Sachetta Callahan advisor can make specific recommendations for you.)

Its Tough to Navigate Alone

This isn’t the same economy you remember from decades past. Right now, at a time of such financial uncertainty, the economy’s not even the same one we knew five years ago. Things are changing all the time. It’s not your job to stay on top of it all.

While a lot has changed about the ways people invest in the modern economy, the need for knowledgeable investment advisors is eternal. Economic trends are changing quickly and COVID is amplifying those changes. If anything, it’s more important than ever to lean on experience. This is not the time to be an island. Let your advisors track the trends and analyze your options, freeing you up to focus on retirement.Sachetta Callahan’s team of advisors is here to help you get ready for the retirement you’ve always imagined, no matter what happens on Wall Street. Our holistic approach means we’re always focused on your big picture. Contact us today with questions about investing.

We’re pleased to announce a growth merger with Wealth Management Advisors, effective January 1, 2022.

Learn more about what to expect.