How To Manage Your Own Retirement Portfolio


Consider Your Required Minimum Distributions

Managing your retirement portfolio in uncertain times: Investment moves to consider

IRS regulations require that owners of retirement accounts including IRAs and qualified employer sponsored retirement plans such as 401s, 403s, and governmental 457s must begin taking distributions annually from these accounts. These distributions are referred to as required minimum distributions . Once you reach your required beginning date , you will start taking RMDs from any Traditional, SEP, and SIMPLE IRAs that you have, as well as from any QRPs left at former employers. The RBD is generally April 1 of the year following the year you turn age 72.

A Clear Picture Helps You Keep Tabs On Your Finances Throughout Retirement

Finally, the retirement cash management system you create with your providers should offer a comprehensive view of your finances. Being able to access concise, up-to-date reports on your cash balances, transactions, and assets is a basic requirement and can help prevent unpleasant cash flow surprises.

Now that youre retired, take advantage of ways to streamline how you manage cash and pay bills. Your cash needs will change over the course of your retirement, so working with your Fidelity advisor to think through the “what ifs” of future cash management also means making decisions about how to use your financial resources during a retirement that may stretch 30 years or more.

Retirement Portfolio Golden Rules Every Canadian Should Follow

Whenever you are adding to your retirement portfolio, its imperative that you keep both your investment goals and good investment practices in mind.

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Retirement is one of the most common goals that people invest in. Most retail investors are simply considered investors, because they create and manage their retirement portfolios themselves, deciding which securities to add and when to exit positions. And when you are working on your retirement portfolio, its imperative that you keep a few golden rules in mind.

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Make Withdrawals From The Right Accounts

Its important that you make the most of your tax-advantaged retirement accounts. The longer you give them to compound without having to pay tax on the gains, the better off youll be. So financial advisors recommend that the order of withdrawal from your accounts should be taxable accounts first, followed by tax-deferred accounts, allowing those special accounts to grow.

Given the extra value of these tax-advantaged retirement accounts, the difficulty of accessing the funds in them and the penalties that come along if you do need to take a distribution from them before retirement age, it makes a lot of sense to pay for your early retirement with funds in taxable accounts first.

Even when it does come time to tap your retirement accounts, it makes sense to use taxable funds first when you can.

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Retirement Portfolio Management: ETFs or Mutual Funds

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Here’s A Look At Some Of The More Popular Investment Options:

Stocks for growth

The majority of savers still buy stocks either directly or through a mutual fund or exchange-traded fund which are shares in a publicly listed company. Stock prices tend to rise over the long-term, which is why people buy them. Since 1926, the S& P 500 has posted a 10.24% average annual return with dividends reinvested, according to S& P Dow Jones Indices. In other words, if you invest in equities in your 30s and retire in your 70s, there’s a high likelihood that your money will have grown over those 40 years.

The downside is that stocks can fall. In the Great Recession of 2008 and the more recent pandemic stock market plunge, stock prices dropped by more than 35%, which caused a lot of problems for those in and nearing retirement.

Bonds for safety

Bonds are another popular investment for savers as they can move a lot less in price than stocks. Investors lend money to a government or company in exchange for an annual payment based on a predetermined interest rate. At the end of that bond’s term usually between one and 30 years you get back your original investment. Investors like bonds for two reasons: they get some guaranteed annual income and there’s less risk, depending on the kind of bond you buy, of losing any money. Because of this, bonds tend to fluctuate less than stocks and so they balance out a portfolio’s overall ups and downs.

Alternative asset classes

Determine Your Monthly Savings Rate

Once youve determined your total retirement savings goal, estimate how much youll need to set aside each year to reach it using a retirement savings calculator. Estimate market returns at a conservative 6% per year, even if historically market returns have been higher.

Assuming a 6% rate of return and the $1.25 million figure from our earlier example, you would need to save about $218,000 over 30 years to reach this hypothetical retirement goal. That works out to $7,266 a year or $605 a month.

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What To Consider When Planning For Retirement

Here are a few key questions to ask yourself as you think about a retirement plan:

  • When do you want to retire? Are you planning to work until age 65 or until you are older than that? Do you have a goal of retiring early? How many more years you plan to spend in the workforce significantly affects how much money you are likely to need. If you choose to work until you are older, not only do your investments have more time to grow, but the number of retirement years you need to fund is slightly reduced.
  • Where do you want to live? Are you going to stay in your current home or downsize? Do you want to stay in the same area or retire somewhere warm or closer to relatives? The cost of living in the area where you’d like to live as a senior citizen is another major factor impacting how much money you will need in retirement.
  • How will you pay for your living expenses? Your Social Security retirement income isn’t likely to be enough to cover all of your expenses, so will you also have a pension? A 401? Will you need to save or invest money as well? Another factor to consider is the magnitude of your living expenses themselves. Whether you own or rent property in retirement can significantly change the amount of your living expenses.

Create A Regular Income Stream

What to know before you manage your own investment portfolio

Start by drawing income from sources other than your portfolio. These can include Social Security, pensions, income property or part-time work. Then start tapping into your portfolio.

Think of it as writing your own retirement paycheck. As a guideline, consider drawing funds in this order:

  • Draw from bonds maturing in the next 12 months, dividends, interest, Social Security and pensions.
  • Sell from your tax-advantaged accountsfirst traditional IRAs, then Roth IRAs.

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Tip : Consider All Your Income Sources

As you put together your retirement portfolio, you also need to think about the role your savings will play in your overall income plan. For example, how much income do you expect from guaranteed sources like annuities, pensions, and Social Security?

If these guaranteed income streams will generate enough income to cover the majority of your expenses, you might be able to maintain a more aggressive stance with your portfolio well into retirement, Rob says. Conversely, if youll rely on your portfolio for the majority of your income, youll need to take a more balanced approach with your investments.

Working Out How Much You Can Safely Take Out From Your Pension

How much you should and can safely take from your pension will depend on what you want to use the money for, how long you want to withdraw it over, how often you want to withdraw and how you choose to invest your money.

Say youre wanting to use one pension pot or part of one pot to give you income that can bridge a gap between stopping full-time work and reaching State Pension age. Then youll be looking to withdraw an amount roughly equal to what you need each year to bridge that income gap.

If, on the other hand, youre looking to withdraw money to support your income needs for the rest of your life, which could be a few decades, then its a good idea to limit withdrawals to somewhere between 3% and 5% of your pension pot. That means if you have £100,000 in a pension pot, you would start withdrawing £3,000 to £5,000 a year.

You should review your investments and the amount youre withdrawing regularly at least yearly. You can then make adjustments depending on the value of your pension pot.

If its grown by more than you expected, you may be able to take a little more out. If its gone down more than you expected, you may want to think about taking a lower amount for a time until your pension pot has recovered a bit.

How much you take out and how often are two of the main factors affecting how long your income might last, so its important to consider this carefully.

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Start Your Retirement Planning Today

Planning your retirement strategy is important but not something to stress over, especially if you start early. The same adage that applies to planting a tree, with the best time being 20 years ago and the second-best time being now, is relevant to investing.

If you need assistance with determining your ideal asset allocation, estimating when you can retire, or planning your retirement income strategy, you can seek the advice of a Certified Financial Planner or other qualified professional. The important thing is that you take retirement planning seriously and get started in earnest today.

Next Steps To Consider

How to Design the Ideal Retirement Portfolio

You could lose money by investing in a money market fund. Although the fund seeks to preserve the value of your investment at $1.00 per share, it cannot guarantee it will do so. The Fund may impose a fee upon the sale of your shares or may temporarily suspend your ability to sell shares if the Funds liquidity falls below required minimums because of market conditions or other factors. An investment in the fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The funds sponsor has no legal obligation to provide financial support to the fund and you should not expect that the sponsor will provide financial support to the fund at any

Fidelity Brokerage Services LLC, Member NYSE, SIPC, 900 Salem Street, Smithfield, RI 02917

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Do You Have The Time For It

Managing your own portfolio isnt a full-time job, but its much more than a hobby that will only take you a few minutes now and then. If youve worked for decades in anticipation of retirement, you may not want to dedicate the time needed to do justice to the management of your portfolio once you stop working.

Advantages Of Managing Your Own Investments

Here are some of the biggest benefits to handling your own investments:

  • Youll pay the least amount of fees. This is the most inexpensive way to invest. If you pick a good broker, the only fees youll pay are expense ratios.
  • Its easier than you think. Managing your own investments isnt the same as pressing an easy button on your desk. But it can be simple. Its not as daunting or silly to consider overseeing your own investment portfolio as some professionals, companies and media members make it sound.
  • It can be gratifying if youre successful. The thru-hiking community have an interesting way of categorizing fun. Theres Type A, which is instant gratification and usually involves the senses. Think eating your favorite ice cream or sinking into a perfectly warmed hot tub. Then theres Type B, which is delayed gratification. It usually involves hard work, but when youre finished, you feel proud of what youve accomplished. Managing your own investments should fit into the Type B category along with things like running a marathon and fixing your own car.
  • Youll be able to pick individual stocks. This doesnt have to be the grave mistake that some would have you believe. Fractional shares and brokerages with zero account minimums make it possible to control the amount of money you invest in any specific asset. If you devote an appropriate percentage of your portfolio to an individual stock or stocks, you dont have to feel guilty.

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How Should You Alter Your Investment Strategy As You Get Closer To Retirement

As someone nears retirement, it’s common for them to shift their investment strategy toward safer, income-focused assets. Riskier assets like stocks tend to perform better over time, but those who are close to retirement may not have the time to recover from a crash. As their timeline shrinks, people often move money out of stocks and into safer assets that produce steady income.

How To Invest For Retirement

Best ways to Manage your Retirement portfolio – Volatility and Inflation!

Years ago, retirement-focused investors would have likely put their money in a balanced mutual fund, which typically consists of 60% equities and 40% bonds. While that asset mix is still popular among savers today you get some growth from stocks and some protection from bonds investors now have more choice.

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Balance Your Portfolio For Income And Growth

One of the largest challenges for retirees is balancing the need for income today with the need for growth in future years. And if youre planning for 30 or 40 years of retirement, youll need to play things carefully with your portfolio to make sure you have money for today and tomorrow.

Youre looking to maintain a high degree of safety in your investments, and youre trying to avoid being forced to sell when high-return assets such as stocks are down. So if you can generate enough income from only a portion of your portfolio and can let the rest grow, youre probably going to be in a good shape for the long term.

In years past, it was easier to allocate money from stocks to bonds and enjoy a safe and robust income stream. Unfortunately, given todays relatively low bond yields, generating enough safe income is harder. In addition, those investing in bonds also have to worry about rising rates hurting the price of their bonds, so bonds are not nearly as safe as theyve been in the past.

If youre deciding how much to allocate to bonds and how much to stocks, financial advisors have traditionally used the Rule of 100 to help investors decide. To judge how aggressive your portfolio should be, you subtract your age from 100 to figure the optimal allocation to stocks.

Managing a portfolio requires a lot of work, however. But if you dont want to do it yourself, you do have some options.

How Should I Invest

After establishing how much to save, its time to figure out what to invest in. There’s a lot to consider when building a retirement portfolio, and we’ll take you through some of those details below. But here are some of the most common products investors choose for retirement.

If youre saving for retirement in your companys 401 or a similar employer plan, its worth noting that not all of these investments may be available. But you can gain access to the other types of investments you desire by using different retirement accounts more on those near the bottom of this page.

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What Should Your Retirement Portfolio Include

As exciting as the prospect of retirement is, it can also feel daunting. Not only do you have to start living off your savings, but you also need to make sure you dont run out of money. So, how do you build a retirement portfolio that serves both purposes?

Its all about striking the right balance between preservation and growth, says Rob Williams, vice president of financial planning and retirement income at the Schwab Center for Financial Research. After all, when you need your savings to last 30 years or more, being too conservative too soon can put your portfolios longevity at risk.

With that in mind, here are three tips for creating a retirement portfolio thats more likely to go the distance.

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