Investing For Retirement: Longevity And Diversification

Investing for retirement is, in some ways, easy. But once it comes to investing during retirement, and investing during retirement for income, things get a bit more difficult, observes Robert Powell, investing strategist and editor or TheStreet's Retirement Daily.

For one, there's the risk of longevity. "The biggest question that we can never answer is, 'How long are we going to need the money?'" says Spencer Betts, a certified financial planner with Bickling Financial Services.

"That question is easier when saving for retirement, because we can predict when we want to retire. If we don't reach our savings goal, it's easy to delay retirement for a short period of time until the goal is reached. Once we retire and are living off of our investments, what happens if we run out of money? It's unlikely we can return to work at that point."

Before deciding what type of income-producing investments to consider once in retirement, Betts says it's important to answer these questions: How much income — as a percentage of your assets — do you need to generate? What is your normal risk tolerance and ultimate goal for your money once you pass away? Is passing money to the next generation a top priority?

If you have Social Security and a pension or other guaranteed sources of income from your investments for supplementing your income for non-essential expensive like travel and gifts, consider a more conservative fixed-income portfolio. "Why take the risk if it is not needed?" he asks. "In general, if you need 2% income from your portfolio, that is for a $500,000 portfolio only needing $10,000 per year, you can be conservative and not need to invest in equities."

If, however, you don't have any guaranteed sources of income outside of Social Security and you need your portfolio for a majority of your income in retirement you need to start looking at asset allocation, says Betts.

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