• Brian Bass

Optimizing Spending and Investing During Retirement

Updated: Feb 26

Investing during retirement follows many of the same principles that investing during your working years does. You want to maintain consistency so the “engine” of your portfolio can provide the returns needed to fund your plan.


The biggest difference is that your spending money has to be created from your investment portfolio. And because you may have shifted to a more conservative asset allocation as you entered retirement, you won’t have the same ability to recover losses as you may have had with your pre-retirement portfolio. You also won’t have the luxury of an extended period of time for your asset values to recoup losses.


Additionally, you want to avoid having to liquidate investments that have dropped in value. Without a plan, a down market can put pressure on the long-term health of the plan. Generating cash by selling investments that have not recovered their value locks in the loss.

We take a look at some of the spending and investing rules of thumb you should follow to make sure your retirement funding keeps pace with both markets and your lifestyle.


Whether your goal is to leave a legacy, guarantee a certain amount of retirement income or something in between, the investment portfolio can be designed to accommodate many things.

Set a Realistic Budget


Once your working days are over, not having a replenishing source of income can be a difficult adjustment. Taking a careful look at your outflows, from monthly expenses, to splurges, to likely big-ticket items such as home maintenance or replacing a vehicle, is critical to setting up a budget that gives you the freedom to enjoy your retirement without being afraid of running out of money.


After getting a handle on the budget, we can start piecing together your paycheck. We approach the income puzzle from the ground up, taking into account Social Security, private pensions, required distributions from retirement accounts and any other income sources. From there, we can analyze the gap between that income and your desired spending goal. If the remaining distributions exceed our view of a safe withdrawal rate, you may need to scale back or make other adjustments.


Evaluate Non-Traditional Income Strategies


There are many strategies, beyond the traditional 4% rule, to attack the retirement income puzzle. Whether your goal is to leave a legacy, guarantee a certain amount of retirement income or something in between, the design of the investment portfolio can accommodate many things. Once we understand your feelings about risk and the types of products you are comfortable owning, we can work with you to design a strategy that helps gives you confidence to live the retirement you have worked your entire life for.


Rebalance Your Portfolio As Markets Change


Your investment portfolio will most likely maintain an allocation to equities to continue to provide the possibility of growth during your retirement. In years when the equity market provides positive returns, it can throw off the overall asset allocation because the value of the equity holdings increases above what you originally designed. Depending on the details of the strategy you choose to employ, this additional growth can be handled in several ways. Rebalancing can help to keep risks in line by harvesting the gains to be repurposed.

The same concept applies when markets go south. When the equity position is reduced, a rebalance sells off assets that have done well and buys the equities that have lost value. This offers the potential for a faster rebound when markets recover.


Don't Get Emotional


Retirement is a scary proposition. You have to balance the what-ifs against living a life that you enjoy. Having an income plan that you have confidence in can help prevent

making knee-jerk decisions when markets sell off. Remaining invested and avoiding trying to time markets is crucial to attaining your long-term goals. It is often helpful to set guardrails around the important investment decisions to keep yourself from making decisions that can permanently change the course of your retirement.


It's All About Balance


Retirement doesn’t have to be spent obsessing over the value of your portfolio. With a little planning and strategy, and an ongoing dialogue around how things are going, spending and investing in retirement can be a happy balance that keeps you engaging in all the things you love to do.


Investments in securities do not offer a fixed rate of return. Principal, yield, and/or share price will fluctuate with changes in market conditions and, when sold or redeemed, you may receive more or less than originally invested. No system or financial planning strategy can guarantee future returns.