If your Edward Jones branch office is temporarily closed due to Hurricane Florence and you need assistance, please call our Client Relations department at 1-800-511-5768 (Monday-Friday, 7 a.m. – 7 p.m. CT) or view additional contact options.
Whether you’re getting ready to retire or already have retired, the need for growth is gone, right? Wrong. You don’t just need investments to get you to retirement; you need them to get you through retirement.
By not taking some market risk, there may be a greater chance you'll run out of money because of another major risk: inflation. An easy way to think about inflation (and the importance of growth investments) is through the increasing cost of your grocery bill:
Growth investments, like stocks or stock mutual funds, should remain an important part of your portfolio. Even if you're already retired, your savings need to help pay for today’s expenses as well as those possibly 25 years from now.
If you took a more balanced approach and invested roughly 50% in stocks and 50% in bonds/cash, we estimate the odds that this portfolio will last 25 years is about 90%.1
So what should you do? Remember that even though you can’t control the market, you can control your investment strategy decisions. We believe there are quite a few actions you can take.
For a 65-year-old couple, there's a 50% chance that one spouse will live past age 90 and a 20% chance one spouse will live past age 95.² One of the best ways to ensure your money lasts as long as you need it is to plan on living longer than you think.
While growth is still important in retirement, short-term market declines – especially early on – can pose a serious risk to your retirement strategy. Having too much in stocks and growth investments can be just as risky as having too little. The key is achieving balance.
In addition to paying for everyday expenses, having cash on hand can help provide a source of “ready money” during market declines. After factoring in outside income like Social Security, we recommend having cash to cover at least a year’s worth of current expenses, plus three to five years’ worth of expenses in investments like short-term bonds or CDs. That way, you aren’t selling long-term investments when they’re down in value. Instead, you are providing them opportunity to recover.
It may be tempting to look for the investments offering the highest dividend or interest rate. But as the old saying goes, there's no free lunch – the higher the rate, often the higher the risk of the investment. Instead of chasing the highest-yielding investment, look for companies that have a track record of growing their dividend over time.
The key is finding balance – not taking on too much investment risk while ensuring you have enough growth potential to reach your long-term goals. Your Edward Jones financial advisor can help you strike the right balance for you.
1 Assuming an initial 4% withdrawal rate and a 3% increase in withdrawals each year for inflation. An all cash portfolio is comprised of Cash/Short-term Investments (50% Cash/ 50%Short-term Fixed-income). A Balanced Growth & Income portfolio is comprised of (50% Stocks/45% Bonds/5% Cash).
2 Milevsky, IFID: Society of Actuaries RP-2000 Table.