Investment Tips: Investment Strategies For After Retirement

Tips on investment strategies after retirement. Includes advice for keeping your principal balance safe from risky investments and reducing the effects of taxes.

So you have spent your life saving for retirement, and now that you're here, you're probably wondering what to do with your retirement savings. Most likely, your retirement nest egg is a combination of pension, IRA and/or 401(k) accounts. You probably also have monthly income from social security, and possibly from a part-time job or hobby. So how do you manage both the money you have saved and the money that is coming in, and build a retirement strategy that will see you through your golden years?

The two main principles of investing after retirement are 1) invest conservatively and 2) use funds in a tax-savvy way. When you reach retirement, it may be tempting to take the large sum of money in your retirement accounts and use them to invest in risky investments that promise high yield in a short amount of time. However, this is not a wise move, since these types of investments also have a high probability of losing large sums of money quickly. Instead, look for investment options that are relatively stable, such as bonds, certificates of deposit (CDs) and money market accounts. Although these accounts have much lower annual percentage rates and thus will not produce as much profit as other types of investments, they are much more secure and will keep your principal balance much safer. If you are worried about maintaining the principle balance of your accounts, choose accounts that are guaranteed by the Federal Reserve, such as CDs and money market accounts. However, be sure to ask about the limits on how much of the account is protected under federal regulations, should the bank go under.

The second step to a good post-retirement investment strategy is to use funds in a tax-savvy way. The rule of thumb is to first use funds that have the lowest tax liability. Such a strategy allows you to maintain your principal balance at as high a level as possible because the more taxes are taken out of your withdrawals, the more of your principal balance you will have to draw on to meet your every day expenses. First, take into account how much money you have coming in from sources such as social security, pensions and annuities, and determine how much you will need to withdraw on a regular basis to meet your expenses. You first want to withdraw money from any non-retirement savings accounts that you have, such as CDs and money market accounts. You have already paid taxes on these funds, so withdrawal won't cost you a dime. Once these funds are depleted, the next money sources should be your IRA and 401(k). The best way to tap into this money is to roll over your IRA and 401(k) into a single annuity that pays a monthly income. This allows you to accrue income while guaranteeing a monthly income. If you do not need an annuity to live on, move these funds to a Roth IRA, which will allow the money to grow tax-free for your heirs. By using this conservative approach, you will ensure a long, financially secure retirement.

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