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Event: Time Horizons

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“I don’t mind if my investments run out during retirement” – said no investor ever.

Maybe you’ve heard people say that when they’re ready to retire they’ll get out of the market. They say prudent investors use stocks only during their working years, but when it’s time to retire, they trade in for something more reliable – an annuity, more bonds, even all cash!

It sounds logical, until you consider the major flaw in this thought process: the key to successful investing up to and into retirement is maintaining the right level of equity exposure within your investment portfolio.

And this level may be higher than you expect.

Think of your investments during retirement like you would an endowment for a scholarship fund. The endowment holds its principle in perpetuity and only allows for a certain amount of money to be taken from the fund each year. By never taking more than the allotted amount, the fund ensures that there will be money for years to come to maintain the scholarship.

In contrast, having all of your money in bonds during retirement doesn’t allow the money to grow fast enough to keep you from cutting into the principle, which puts you in danger of using up your retirement savings early.

In a very real sense, the date of retirement is actually the beginning of the investor’s most important investing phase. The purpose and handling of the portfolio in this phase can have as much to do with retirement income as the investor’s entire lifetime of investing decisions.

This time period – the time you plan to keep your money invested – is what people in financial professions call your Time Horizon. Investopedia defines it as the total length of time that an investor expects to hold a security or portfolio.

So, now it’s time for you to answer some questions about your portfolio while you plan for your retirement:
• What is your time horizon? (How long do you expect to hold your portfolio?)
• What are your expected income needs in retirement?
• What part will your portfolio play in meeting these needs over the time required?
These are complex questions that may be hard to answer without some help.

On May 17, Evan Vanderwey will be hosting an Investor Coaching Seminar in East Lansing that will dive into this concept, and you’re welcome to join us. Afterward you are invited to schedule time to meet with us to talk about your retirement income needs and investing time horizon so that you can achieve peace of mind.

For more information about Evan’s upcoming Investor Education Seminars, contact Kristin Faasse ([email protected]) or Liz Trawczynski at (517) 853-5473.