Answers to 4 retirement income questions

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When you retire after years of saving and investing, you’ll pivot to a withdrawal strategy. The transition to using your accumulated financial assets instead of an employer paycheck or business income involves a shift in financial planning principles and mindset.

Personalized advice is an essential resource to help your retirement income last and manage risks. Your Ameriprise financial advisor is committed to helping you in these areas as well as with the complexities of investments in retirement. To help guide conversations with your advisor, here are answers to four common retirement income questions.


Should I withdraw the same amount every year?

While you may have saved a fixed amount every month before retirement, withdrawing a fixed amount for income every month may not be the ideal option for retirees today. While a standard withdrawal rate of 4% annually — a popular concept for years — can help illustrate your options, a withdrawal rate personalized to your goals and changing needs may be more effective over the long term.

Costs related to your health, medical care and retirement activities, for example, will likely change year to year. Your advisor can help you re-evaluate your withdrawal amount every year, including the timing and income sources appropriate for your situation.


What should I know about the stock market?

A bull market with rising stock prices could help your diversified investments continue to grow and help you stay ahead of inflation in retirement. But what if the stock market is down when you’re about to retire?

Market conditions can have a pronounced impact during the initial years of retirement. When stock prices are lower because of a market correction, for example, you would need to sell more stocks to reach your income target. Because you are no longer contributing money and have less time for compounding — this occurs when an asset's earnings from capital gains, dividends or interest generate additional earnings over time — selling in a down market impacts how long your portfolio assets will last.

Personalized investment recommendations from your Ameriprise financial advisor can help support your financial goals, time horizon and risk tolerance. They can recommend an appropriate allocation of stocks, bonds, cash and alternative investments.


Given low interest rates, what are my options for investment income?

Your growth-oriented investments likely benefited from many years of low interest rates. Low rates also were good for financing a home or other large purchases.

But in retirement, generating income from interest or dividends from fixed income investments (bonds) requires higher interest rates. Even though historically low bond yields may be the norm now, investors still have options.

“We anticipate a slow, measured withdrawal of Federal Reserve stimulus over the next several years,” says Ameriprise Fixed Income Strategist Brian Erickson. “For investors, that means somewhat higher bond yields on intermediate and long maturities over the next couple of years. And in the current environment, we believe Treasuries are solid ballast in a diversified portfolio. We recommend maintaining a mix of both Treasuries and short-term Treasury Inflation-Protected Securities to counter unforeseen events and inflation pressures.”


How can I manage investment risks in retirement?

Investment portfolio risks cannot be eliminated. Even the safest investments contain some risk, including the risk of diminishing purchasing power over time. But risk can be mitigated. Beyond the fundamental steps of identifying your risk tolerance and building a well-diversified portfolio, there are additional strategies your financial advisor might recommend.

For example, investing in low-volatility stocks, emphasizing high dividend payers or investing in alternative assets might be appropriate. It is also possible to employ hedging strategies to protect existing positions and preserve the capital you have accumulated.


A personalized plan for a more comfortable retirement

When you begin using your investments for retirement income, your advisor can help you develop a sustainable withdrawal strategy. Continue to work closely with them.

They will factor in your goals and current conditions, including the stock market, taxes, interest rates and inflation. Their personalized advice will also align with your risk tolerance so that you feel comfortable with your investment selections throughout market cycles.