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  Overview of the Investing Process  

The primary objective in managing your investment portfolio  ("investments")  is to provide investment income or earnings to supplement your recurring, nonportfolio income from pensions, social security, already-purchased annuities, or employment earnings.  Your income objective can be referred to as your "target" investment income.  


As a practical matter, for most persons it is necessary to gradually “spend down” their portfolio principal value in addition to spending portfolio income to be able to provide enough cashflow to satisfy current and potential needs.  At the end of your lifetime, whatever has not been spent down becomes part of your estate, available for your heirs or charitable bequests.  Conversely, completely spending down your investments before you die means that you’ve run out of money too soon.  Managing this delicate balance to 1) avoid  running out of money, 2) maintain precautionary savings to cover possible healthcare and long-term care costs and 3) possibly provide for an estate is the unique financial challenge facing you during retirement. 


In many ways, managing your investments after retirement is a more complex and time-consuming process than during your working years when your primary goal was wealth-accumulation.  Moreover, investment income is the most unpredictable of your income sources, and the futher you advance into your retirement years, the less margin for error you have to recover from mistakes or market downturns.


The post-retirement investment process involves several major steps:



● Decide on your target investment income  --  This is really your total annual spending plan less income from recurring sources such as pensions, social security and post retirement employment.  For most, there is a "gap" that must be funded by investment income plus drawdowns of principal.


● Determine your time horizon  --  Estimate how many more years you and your spouse will live.


 Investment policy (&  asset allocation)  --  The end product of your investment planning process should be a written statement of investment policy which takes into consideration your tolerance for risk in deciding how to allocate your financial assets.


● Tactical considerations  -- While the investment policy statement provides the blueprint for building and managing your investment portfolio, there are many things to consider in best implementing your investment policy, some of which are unique to investing during your retirement years.


● Periodic review of your investment performance  --  Finally, you need to check performance and re-evaluate your investment plan annually to make sure you're on track to achieve your goals.  Very often, "rebalancing" of your investment portfolio is needed.  And if your investment performance has been poor you may want to consider adjustments in your spending plan.  This is also the appropriate time to evaluate opportunities for extending your income ladders.


In summary, saving and investing after retirement  can be a much more difficult challenge than saving before retirement.  Feeling a bit intimidated by this strikes us as a perfectly normal reaction, but there are means to simplify the task.  Learn how to take the next step: determining your target investment income.



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