| New life stage. New strategies.
For years your retirement planning has probably focused on growth, or how you can accumulate the most assets. When the time comes to retire, the focus shifts to turning that wealth into income that will fund a retirement potentially lasting for decades. What you may not realize is that
some of the strategies that worked well in the accumulation phase won’t apply any more when you begin the distribution phase – drawing on your assets for income.
Dollar cost averaging, turned upside-down
During the accumulation phase when you’re building assets for future goals, dollar cost averaging can make a lot of sense. It’s a strategy that calls for investing the same dollar amount at regular intervals. When you’re dollar cost averaging, dips in price may actually be beneficial because they give you an opportunity to "buy low." When you’re investing for the long term, you may have time to ride out the ups and downs of the market.
In the distribution phase, however, the conditions that were good for dollar cost averaging might not be so good any more. Taking a withdrawal when the price of an investment has dropped could mean selling low. And your portfolio may not have the time to recover and ride out those market ups and downs.
That’s why it’s important to work closely with your financial advisor in the years leading
up to retirement. You’ll want to make sure your portfolio is as ready as you are when you finally stop working full time.
Getting ready for the next phase of life
There are many different factors to consider when you’re planning for life after you stop
working. We offer one way of approaching it in our Rethinking Retirement program, where we present four different areas for consideration.
- A new mindset. Shifting from where to find the best returns to how to get the income you need and preserve your purchasing power throughout retirement.
- A new investment approach. Balancing three concerns that may not have been as much of a focus during the accumulation phase: yield, volatility, and purchasing
power.
- A new plan. Making sure you’re prepared for the amount of time you may spend in retirement as life expectancies are longer than ever.
- A new portfolio. Considering new asset classes that may not have been part of your portfolio when your sole focus was accumulating wealth.
To see more detail about each of these areas, see video clips from our Rethinking Retirement program. The Rethinking Retirement program is designed to help you gather your thoughts and collect information that will lead to truly productive planning sessions with your financial advisor.
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