3) Adjust your habits for market conditions
“Consider using adaptable spending if your budget allows,” counsels Denning. “When your portfolio declines in value, reduce your planned withdrawals; and when the market increases, increase your withdrawals or spending.” This approach, he adds, “can dramatically increase the long-term sustainability of your portfolio.”
4) Focus on fixed income
Although it’s important to maintain an allocation of stocks, bonds, and cash in your portfolio, pay special attention to your bond allocation, Denning advises. “In today’s low-interest-rate environment, many analysts are predicting a slow and steady increase in rates during the next five to 10 years. While increasing rates are desirable to retirees, it can also have a negative impact on the value of your bond portfolio.
“For instance, if interest rates rise by 1%, a bond portfolio with a 10-year duration will decrease in value by 10%,” Denning says. A possible solution: “I would suggest selecting a bond portfolio with a two-to-three-year duration, where a 1% increase in rates would only result in a 2% to 3% decline in the value of the portfolio.”
5) Build your health care plan
As life spans and the number of years you spend in retirement increase, you likely will be subject to a corresponding increase in health care expenses. According to a 2015 report from HealthView Insights, the average lifetime health care expenses for a 65-year-old healthy couple retiring in 2015 and covered by Medicare parts B, D, and a supplemental insurance policy will be more than $400,000 once out-of-pocket medical expenses are added into the equation.
Regarding this somewhat sobering statistic, Denning advises to pay attention to your health and address any medical issues before they have a chance to become major concerns.
It’s not your parents’ retirement — the same strategies that worked for them may not be right for you if you’re looking at spending 25 or more active years as a retiree. Taking a thorough look at your investment strategy may help ensure you’ll be enjoying every one of those years.