SMI For Those Living in Retirement

Apr 28, 2021
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We sometimes get questions from prospective members who are retired, asking whether our investment strategies and editorial content would be helpful for them. Their perception is that our focus is on people who are preparing for retirement, not living in retirement. We’re always glad to get that question because we believe SMI has a lot to offer retirees!

Investing in retirement

Since SMI is in the investment business, we spend a lot of time thinking and writing about risk management. Of the many risks investors face, such as market risk and inflation risk, one of the most formidable foes is longevity risk. Today, according to the Social Security Administration, a 65-year-old man can expect to live another 19 years; a 65-year-old woman can expect to live almost another 22 years. That makes the possibility of outliving your money a crucially important risk to manage.

That’s why we encourage retirees to continue investing in the stock market. While it’s important to decrease the risk profile of your portfolio as you get older, it’s also important to maintain an appropriate allocation to equities. That’s the best way we know of to generate strong enough returns to outpace inflation and enable you to draw the income you need from your portfolio for as long as you live. Our strategies can be used in ways that deliver the returns retirees need along with the low volatility they want.

That could mean going all-in with Dynamic Asset Allocation, our strategy for risk-averse investors. Without even having to determine your optimal asset allocation, DAA is designed to objectively steer you out of harm’s way during bear markets while enabling you to share in the substantial gains that occur in a bull market.

Another approach involves utilizing either Fund Upgrading or Just-the-Basics: you maintain stock market exposure while managing downside risk by choosing a bond allocation appropriate for your age and risk tolerance.

We believe most of our members — retired or not — would be best served by utilizing our 50/40/10 approach — allocating 50% of one’s portfolio to DAA, 40% to Fund Upgrading, and 10% to Sector Rotation. (Read Higher Returns With Less Risk, Re-Examined.) Our research indicates that the 50/40/10 approach delivers a wonderful blend of decreased risk (vs. Fund Upgrading alone) and optimal returns (vs. DAA alone).

Some retirees may opt to make the strategy allocations even more conservative by increasing the percentage of their portfolio devoted to DAA while decreasing the percentages allocated to Upgrading and Sector Rotation.

Because peace of mind and a reliable income stream are especially important priorities for retirees, we also believe many such investors would benefit from utilizing the “bucket” strategy, in which one to three years’ worth of living expenses are held in cash. (We wrote about this approach in the March 2018 and April 2020 issues of the SMI newsletter.)

Learning in retirement

Retirement brings with it many other financial questions. That’s why we regularly write about such topics. In fact, the Level 4 content in each issue of the Sound Mind Investing newsletter is specifically devoted to preparing for and living in retirement.

Here are some of the main topics of interest to retirees, along with the titles and links to key articles we’ve written on each one:

Tell us what you think

Are you retired? If so, are there other “living in retirement” topics you’d like to see us cover or other ways we can better serve your needs? Please let us know.

Written by

Matt Bell

Matt Bell

Matt Bell is Sound Mind Investing's Managing Editor. He is the author of five biblical money management books and the teacher or co-teacher on three video-based small group resources. His latest book, Trusted: Preparing Your Kids for a Lifetime of God-Honoring Money Management, has just been published by Focus on the Family and its publishing partner, Tyndale House (April 2023). Matt has spoken at churches, universities, and conferences throughout the country and has been quoted in USA TODAY, U.S. News & World Report, and many other media outlets.

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