top of page

Making Money Work After Work

Shannon Davis

How to Grow Your Retirement Savings When You’re Not Contributing Anymore


If you’ve recently retired or stopped working, you might be worried about how to ensure your savings continue to grow without dwindling. It’s a common concern, but the good news is there are several strategies to help manage your savings wisely. Here’s how to make your money work for you, even when you’re no longer adding to your retirement account.


Evaluate Your Current Asset Allocation

When you stop contributing to your retirement account, it’s crucial to reassess your asset allocation. Depending on your age, financial goals, and risk tolerance, you may need to shift your investments to better align with your new financial situation.

For example, as a retiree, you might prioritize more stable, income-generating investments like bonds or dividend-paying stocks rather than high-growth, high-risk assets. However, if you’re a retired firefighter or police officer still in your 50s and working a second career, your risk tolerance might differ from that of a 60-something retiree who is fully retired.

Action Step: Review your portfolio with a financial advisor to ensure your asset allocation matches your current needs. Don’t forget to factor in other income sources, like a pension, which can impact your investment strategy.


Focus on Income-Generating Investments

Without new contributions, your investment strategy should focus on generating income to sustain your living expenses. Options like dividend-paying stocks, rental real estate, or annuities can provide a reliable income stream. Bonds or bond funds are also worth considering, as they offer consistent interest payments.

Action Step: Explore investments that provide regular dividends or interest payments, and adjust your portfolio to include these assets. If you have a pension, remember that it acts as an annuity, offering a stable income stream.


Keep an Eye on Inflation

Inflation can erode the purchasing power of your savings over time, so it’s essential to include growth-oriented investments in your portfolio to outpace rising prices. Stocks, real estate, and inflation-protected securities (like TIPS) can help maintain your portfolio’s value in the face of inflation.

Action Step: Incorporate investments that are likely to grow over time, providing a hedge against inflation.


Implement a Sustainable Withdrawal Strategy

Managing your retirement savings effectively includes establishing a withdrawal strategy that sustains your lifestyle without depleting your funds too quickly.

The 4% rule—suggesting you withdraw 4% of your initial portfolio each year, adjusted for inflation—is a popular guideline, but it may not suit everyone. Considering increased longevity and changing market conditions, many experts now recommend a more conservative withdrawal rate, such as 2.5%.

Action Step: Develop a withdrawal plan tailored to your needs, factoring in your expected lifespan, market performance, and lifestyle expenses.


Minimize Fees and Taxes

High fees and taxes can eat away at your retirement savings, so it’s important to adopt a cost- and tax-conscious approach. Low-cost investment options like index funds or ETFs help reduce fees, while tax-efficient withdrawal strategies can minimize the tax impact on your distributions.

Action Step: Regularly review the fees associated with your investments and explore tax-efficient strategies for withdrawals. Keep in mind that while low fees are important, it’s the net earnings (returns after fees) that truly matter.


Consider Professional Advice

A financial advisor can provide personalized guidance to help you navigate the complexities of managing retirement savings. They can fine-tune your asset allocation, suggest income-generating investments, and develop a plan to make your savings last.

Action Step: Schedule a meeting with a financial advisor to review your retirement strategy and make necessary adjustments.

 

Even if you’re no longer contributing to your retirement account, there are plenty of ways to help your savings grow and support your financial goals. By evaluating your asset allocation, focusing on income-generating investments, protecting against inflation, implementing a sustainable withdrawal strategy, minimizing fees and taxes, and seeking professional advice, you can make your retirement savings work for you.


Remember, effective retirement planning is an ongoing process. Regular reviews and adjustments will ensure you stay on track to enjoy financial security throughout your retirement.

8 views0 comments

Recent Posts

See All

コメント


bottom of page