Generating income from investments throughout your retirement years
Retirement income boost
You’ve been investing for decades to earn enough money to retire and the day has finally come that you can stop working. At this point your risk-profile and strategy will almost certainly need to adjust in order to look at ways of making your money work as hard as possible, but with a view to generating income from your retirement.
This is a time to look at how balanced your investments are and whether you are exposed to more risk than you are comfortable with in certain areas. It’s time to conduct a review of all of your investments and decide how much you can afford to withdraw each year and whether this balances with your needs.
Too risk-averse
An elementary mistake that some retirees make is to view their portfolio with an element of finality and this makes them too risk-averse and unwilling to look beyond their current financial position.
Of course, retirement means different things to different people. For some, it’s about never working again, and instead spending their days doing the things they enjoy most, such as travelling, pursuing hobbies and spending more time with family and friends. For others, retirement means working part-time or occasionally to stay busy and engaged in a profession, but without the need to earn a regular income.
Time of your life
Regardless of what retirement looks like to you, the key is to enjoy this time of your life, while making sure you don’t outlive your retirement savings. For many retirees, that means developing an investing strategy that will allow them to withdraw money from their portfolio while still enabling it to grow over the longer term.
There are a lot of ways to invest even after you have retired and your working days are done. It goes without saying that once you have retired you’ll want your retirement nest egg to last as long as possible. And with people living longer than ever, your nest egg may need to stretch further than you’d thought when you first started saving for retirement.
Potential investment options
Given the potential investment options available to post-retirement retirees, at the point of investing it’s also really important to consider the effects of future financial market volatility and inflation.
While the risk of portfolio declines can’t be overlooked, retirees also face another type of risk, inflation. Even though we currently have historically low inflation today, it’s critical for retirees’ investments to keep up with inflation throughout their retirement years. Cutting exposure to equities too aggressively could hinder the growth of a nest egg, potentially leaving retirees with less than they need.
Keeping up with inflation
While many should stay invested, retirees must make sure a good portion of their investments are in safer assets. Today’s low interest rate environment means your money may not grow quickly, or even keep up with inflation, but those assets will likely be better protected than equities in a market downturn.
If appropriate, retirees should typically have a healthy mix of equities, bonds and other investments, such as property. The right mix will depend on an individual’s personal risk tolerance. Retirees should also set up their portfolios in a way that better protects the funds they may need in the next five years, in the event of future stock market corrections.
Toning down risk appetite
It can be hard for some retirees to tone down their risk appetite when investing during their retirement years, following decades of investing for growth. But diversification is just as important for investors at any age, and may be most critical when investing in retirement.
This is a time of your life to ensure that you spread your investments across and within asset classes to make sure you are well diversified. You can spread your money across the three major asset classes (equities, bonds and cash equivalents). This is known as asset allocation. To balance the risks and returns of the asset classes and the investment within the asset class itself you can also spread your money across various investment options within a particular asset class.
Increasing financial security
The most careful plans and preparation for retirement can fall apart due to any number of post-retirement risks. But making the right investment decisions can help you increase your financial security and provide income that you can use to live comfortably after you stop working.
It is a good idea to try and set aside up to two years of living expenses in cash. Having some money that you can access quickly in an emergency situation will protect you from the need to sell some of your riskier investments at a loss and cover you for a period of time if you are falling slightly short of your income generation target. 
