Financial opportunities for retirees to consider now


Senior couple sit at table and look at laptop

Key Points

  • Turbulent markets have presented retirees with unique challenges.
  • Three strategies for retirees could help you meet income needs while minimizing portfolio impacts.
  • Your advisor will assess these strategies and provide personalized advice for your situation.

With stocks and bonds under pressure, retirees have unique financial planning decisions to make. Here are three strategies worth considering with your advisor today.  

 
Strategy 1: Assess your spending needs

Take a close look at your spending needs for the year. If you and your advisor have already set up an income plan, it may need to shift based on the market conditions we’ve been experiencing.

The purpose is to limit the amount of account withdrawals you take during a down market. The reason: As prices decline, to get your target amount of income, you need to sell more shares than you did previously (before the markets became volatile).  


Strategy 2: Consider pausing large purchases

Depending on your financial situation, you may want to consider postponing higher spending until the market begins improving. For example, it may make sense to pause before beginning a home renovation or buying a recreational camper. Even modest reductions in spending during a volatile stock market can be very helpful.

Remember that a decision to pull back spending doesn’t have to be set in stone. Flexibility is your friend. When the current uncertainties subside you can revisit making a large purchase.


Strategy 3: Use your investment income instead of reinvesting it

A broadly diversified portfolio should continue to produce some income, even while the prices of securities are down. In addition, bonds in the current environment should continue to pay interest, which is income coming into your account.

Instead of reinvesting the income, consider transferring it into a different account. In retirement planning, this is called sweeping income. It’s a powerful tool because it decreases the likelihood that you’ll need to sell as many securities at reduced prices.

For example, assume you were planning to spend $40,000 from a portfolio producing $20,000 per year in income. By sweeping the income into a spending account, you would cover about half of your income needs, leaving only $20,000 worth of securities to sell. This is a better option than having to sell $40,000 worth of securities during turbulent markets.