One of the biggest challenges most people face in retirement is generating the regular income they need and maintaining it for the rest of their lives.
You may have substantial assets, and financial planning for retirement but they’re not limitless, so you must be careful how you manage them. To meet the dual goals of generating needed income and sustaining it this is what you do.
First, determine the amount of annual income you need currently—say, €50,000—and then determine the best place(s) to get it. It won’t all come from your retirement account because you likely have other income sources: State benefits, perhaps a pension, an inheritance, earnings from a part-time job and funds from other savings or investments.
All of those could reduce dramatically the amount you need to generate annually—perhaps to as little as €25,000 or €30,000.
To determine the rate of return you need to earn on your retirement investment, factor together all of these realities and your personal preferences: Do you want to leave something for your heirs, preserve capital or spend it down? Then it’s time to design a portfolio to meet that target.
Once you have the right portfolio, what is the best way to invest it? Well, if diversification is important to use throughout your working career, as I have long espoused, then it’s doubly important once you’re in retirement. Read More