3 Keys to Investing in Retirement, Ep #3

“How should I be Investing in retirement?” This is one of the most popular questions that I get from listeners. What should you invest in? How do your investments help you reach your goals? What does your portfolio need to do for you in retirement? In this episode of Retirement Made Easy, I share my opinion on these questions and give you the 3 keys to successful investing in retirement. 

You will want to hear this episode if you are interested in…

• [1:07] How you should be investing in retirement
• [3:01] Key #1: Understand how your investments will help you reach your goals
• [6:35] Key #2: Make sure your investments are flexible and liquid
• [9:24] Key #3: Keep your portfolio diversified

Key #1: Understand your investments and how they will help you reach your goals.

I was recently asked if someone should invest all of her retirement savings in gold or silver. So I asked her what her expectations were for retirement. She said she’d like a monthly income from her 401k and her 403B. To achieve that, she would need the money to grow and provide interest to support her lifestyle. So I asked her, “How much of a dividend does gold pay?” She didn’t know the answer—but I did. 

Gold and silver don’t pay dividends and they don’t pay interest. Your only hope of making money is that the price of gold or silver increases. You’d then draw income by selling part of your investment every month. But there’s no guarantee that the price will increase. Ultimately, she realized investing in gold or silver wouldn’t work well for her at all. 

The moral of the story is this: She needed to set up a portfolio that would produce monthly dividends and interest for her to draw from in retirement. What you invest in changes based on your goals and the answer is different for everyone. What do you want out of your savings in retirement? What do you expect it to do for you? Why do you own what you own? What I hope to hear is “I own it because it’s helping me accomplish my retirement goals.”

Key #2: Make sure your investments are flexible and liquid

There are three certainties in life: death, taxes, and change. We know life changes all the time and our needs evolve. If your investments are illiquid, it may leave you stuck. But liquid investments give you the flexibility to make changes as life goes on. Sometimes, the smallest changes make the biggest difference. 

Real-Life Example: A couple I work with had been retired for 5 years when they found themselves adopting their 14-year-old granddaughter. We needed to make some adjustments to their investment portfolio to provide more income to help raise their granddaughter. She’d need help buying her first car and paying for college. 

I helped them calculate how much more money they were going to need every month. We put a number on it and talked through the possible options to change their portfolio. They decided on the best route to take together. Their goals changed—and so did their portfolio. 

Key #3: Keep your portfolio diversified 

I often see people embrace an ‘all-or-nothing’ mentality with investing—and it’s a huge mistake. You NEED to keep your portfolio diversified. You’ve probably heard the phrase “Don’t put all of your eggs in one basket.” Why? If you drop your basket, all of your eggs break. But a well-diversified portfolio helps you spread out your risk.

When General Motors went bankrupt, its stock price dropped to ZERO. A gentleman had invested his entire life savings in their stock and lost everything. He wanted GM to make him whole again—but it wasn’t going to happen. If he would’ve diversified, things would’ve ended quite differently, right?

The best investment portfolio is one that’s diversified, flexible, and liquid. You should understand what you own, why you own it, and how it’s aligned with your life-long goals. You also have to change your retirement portfolio once you retire. In retirement, your money needs to work as hard for you as you did for it. If you follow these 3 keys, you’ll be well on your way to a successful retirement. Listen to the whole episode for in-depth examples to help deepen your understanding!

Resources & People Mentioned

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