As retirement age becomes less of an obscurity and begins to stare us in the face, the pressure to get our retirement accounts under control feels all the more pressing.
Retirement planning starts for many as younger investors preparing for the future, but many others join a little later.
Planning an investment strategy for your retirement at 60 gives you are whole different set of priorities, and you have a clearer idea of what you have and what you need. Even if you have been preparing for retirement since you got your first job, 60 is still a great age to stop, evaluate, reassess, and make some changes.
Here is a step-by-step guide on how to prepare and build the best investment portfolio for retirement when you reach the age of 60.
1: Make an Evaluation of Your Financial Circumstances As the Stand
Before you do anything, take time to figure out exactly where you are now with your financial situation and retirement setup. Efficient financial planning can’t begin until you know what you are working with.
- Look at everything you have in all your savings accounts combined. Make a list of all your assets (including properties, money in savings accounts, and current investments) and what they are worth. Do the same with your debts and liabilities (outstanding mortgages, credit card debt, other loans, etc.) Determine your rough net worth based on your assets and liabilities.
- Think about how much you estimate your annual spending to be after you retire. Make sure to include healthcare, insurance, bills, general living expenses, and any special purchases or trips you intend to pay for.
- Consider how long your money has to last and how close you are to having enough. You also need to think about what the overall time horizon will be on any investments you make.
2: Decide What Your Goals Are and How Much Risk You Will Take to Achieve Them
Step one will give you a pretty good picture of how well you are set up for retirement overall, and from there, you can set goals for investments. You want to comfortably have enough to do everything you need and want to do, so you should set your goals accordingly.
Be realistic with your goals.
Use the SMART strategy for your goal setting- a.k.a. make Specific, Measurable, Achievable, Relevant, and Time-bound. Do you want to boost your portfolio by a certain amount? Maybe you want to establish enough steady income to avoid dipping into your savings account for general living costs. Whatever it is, be SMART about it.
Decide how much risk you are comfortable with.
Your risk tolerance is not about how brave you feel- it is about what you can realistically afford to put on the line compared to the potential consequences if you don’t. Preserving capital should always be a priority with retirement funds, even as you look for ways to generate new income.
3: Strategize with a Diverse Investment Portfolio in Mind
Be strategic about the investments you choose, and always remember that diversification is essential for balance and protection long term. Market volatility makes putting all your eggs in one basket a big no-no, you need to have other investments to fall back on.
- Consider fixed-income investments that generate a guaranteed income stream.
- Look into EFTs and low-cost index funds. They have minimal fees and offer great market exposure.
- Invest at least some money in the stock market and dividend-paying stocks. The risk may be higher in some cases, but the reward tends to be higher.
- Think about the alternatives like real estate, gold, and other assets.
4: Optimize Your Use of Retirement Savings Accounts
Having the right retirement accounts makes a huge difference. A high-yield savings account can bring in gains through generous interest rates- something you miss out on if you don’t have one. Some retirement savings accounts provide tax benefits. Sometimes, you don’t need to pay taxes on the deposits and sometimes the withdrawals are tax-free.
Some of the options to look at include:
- Traditional IRA
- Roth IRA
Find out how to deposit the maximum amount into these high-yield savings accounts. You may still have more than a decade until you retire, and those years of interest rates could make a difference.
A Few Other Things to Consider
Don’t Forget to Balance Preserving Capital and Generating Income
The two main strategies in retirement investments are capital preservation (making the money you already have stretch further) and income generation (earning more money throughout your retirement). These do not have to be mutually exclusive, and balancing the two is one of the best ways to secure your financial future.
Choose Dividend Paying Stocks Wisely
Dividend-paying stocks are excellent for a steady income and potential growth, but you need to pick them well. Ideally, look for blue chip stocks with a solid track record.
Explore the Retirement Income Sources Available to You
There is more out there than just stocks and bonds. The investment market is vast, with opportunities in real estate, commodities, and much more. Having investment strategies in place is essential, but it is good to remember that something new that suits you perfectly could pop up later.
Speak to a Trusted Financial Advisor
Financial advisors can help with taking stock of exactly what you have and what risks you can afford to take. They may also have suggestions for specific investments that balance well with your current portfolio.
The Bottom Line
Managing your retirement savings is a little different once you reach 60 because the idea of retiring suddenly feels real. It is also easier to assess what needs to be done, and the shorter timeframe can sharpen your decision-making skills.
In short, building the best portfolio for retirement once you hit 60 is about maximizing your returns, protecting the savings you already have, and making simple, smart choices that you will thank yourself for later!
It is never too early to start making retirement plans, but at some point, it can feel like a little too late. At 60, there is still plenty of time to make a difference, so speak to a financial advisor and get the ball rolling.