Investing in Retirement: Part One

Personal Money Planning |

Investing Changes During Retirement

By Gary Silverman, CFP®

Well, I made it through the Marathon Sunday. Due to logistical issues, I ended up running 27.2 miles instead of the normal 26.2, so I’m saying I ran an Ultra-Marathon. Thanks to my fellow runners (and friends) Traci, Christi, Jacque, and Kathy along with many others who lent support along the way.

Today I want to begin a little series on problems people run into when shifting from investing for retirement to investing while in retirement.

The first thing to look at is time. When investing for retirement, you have a pretty good idea of how long you will be saving. When I broach this subject with clients, most will say they’ll retire at 65, though 62 and 70 are common answers.

Those three ages may be seared into our brains because of Social Security milestones. At 62 you can begin drawing at a reduced rate, and 70 is the age where you’d get the maximum monthly payments if you can wait. In the past, people could begin to draw at age 65 without being penalized. Now, for most pre-retirees reading this, drawing without penalty begins at 67.

Remember, just because you think you are going to work to a particular age doesn’t mean you will. Your health might not allow it (the most common reason for early retirement) or you might find yourself laid off with few job prospects. But even with all that, you can probably guess at a much younger age when you will retire and be accurate to within five years or less.

This is not true for determining the age when you are going to die. Yes, there are actuarial tables that share the average age when somebody like you will die, but that just tells you that about half of folks like you are already dead by then and the other half are still alive. And the dispersion of the true ages is very wide indeed.

For instance, if you are a 50-year old man, the actuarial tables place your life expectancy around 81 or 82-years-old. Now, look at the obituaries this week and tell me if you see anyone dying a lot younger than that and a lot older than that. You already know the answer.

Those saving for retirement can come close to guessing when they’ll retire, and therefore have some control over how old they will be at that time.  Those in retirement now, however, don’t have quite as much say as to how long they are going to live. This adds a wrinkle for investing when you are retired.

When you’re saving for retirement, assuming that you’ll have five years (or less) than your original plan to save and grow your investments can protect you from most events. If you’re already retired, you’ll need to assume you’ll live 10-15 years beyond what the actuarial tables say. This could as much as double the number of years your money has to last.

Something to keep in mind when managing your portfolio in retirement.


Gary Silverman, CFP® is the founder of Personal Money Planning, LLC, a Wichita Falls retirement planning and investment management firm and author of Real World Investing.