Mitch's Mailbox

September 26th, 2022

Making the Financial Transition into Retirement

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Lisa and Chuck C. from Marietta, GA ask: Hello Mitch, my husband and I are officially retired and making some moves. We have decided to downsize (sell our house and move into an apartment), and we have also decided that market volatility is too much for us to handle. We want to sleep at night! What tips can you offer us as we make this transition?

Mitch’s Response:

Thanks for writing and congratulations on your retirement! Let’s start with the downsizing part of your question, which has more layers and considerations than many would expect. The first action item here is to consult with a real estate agent and an appraiser to obtain a clear picture of what your house may sell for, based on the current market. Mortgage rates are climbing and demand in the housing market is showing signs of waning, so it is important to understand how that has affected your local market.

Other considerations involved in the sale are the expenses you will incur, such as the cost of any updates that are needed, staging, capital gains taxes (which can be up to 20%), moving costs, and closing costs for the listing agent, which could be up to 10%. In other words, it is important to do what you can to get a clear picture of what you can expect to walk away with, as you will likely be using that money for your next purchase and/or to add to your retirement nest egg.1

Building an Effective Retirement Portfolio as Market Volatility Persists

Creating a retirement portfolio involves much more than simply picking stocks, bonds, mutual funds and other assets, especially during a volatile market. That’s why I’ve created a special guide for investors to learn how to create a retirement investment plan that can withstand any market—and potentially help you achieve your goals.

You’ll learn the secrets of successful retirement portfolios, including the right way to set your goals and retirement needs, as well as the key basics of disciplined investing, based on our decades of experience.

If you have $500,000+ to invest, get our free 7 Secrets to Building the Ultimate DIY Retirement Portfolio2 guide today.

A final step is to have a clear sense of what your new monthly expenses will be at the apartment or smaller home you intend to buy. If you are moving to a retirement community, for instance, there are likely monthly fees to cover amenities like security, landscaping, fitness rooms, and so on. These expenses would be in addition to the monthly cost of your new home or apartment.

The second part of your question concerns market volatility, which I understand can be unnerving particularly when you’re trying to enjoy retirement. I would need to know more about your specific financial situation to offer any advice here, but I will say that most retirees I work with need at least some level of growth in their investment portfolio. If you’re not working, you are likely getting income from Social Security, perhaps a pension, and also your retirement savings. Without growth in your retirement savings/investments, you will place those accounts on depletion trajectories over time – which may also cause you to lose sleep at night.

Most retirees need some level of growth, and volatility is the price we pay in the short term for attractive levels of growth over the long term. While volatility cannot be avoided, it can be controlled with an asset allocation designed to balance your tolerance for risk with your need for growth. It may be that your current portfolio is allocated in such a way that you are experiencing a higher level of volatility than is needed to meet your goals, which opens the door to making some adjustments.

To help you create a retirement investment plan that can withstand any market– and potentially help you achieve your goals, I recommend reading our guide, 7 Secrets to Building the Ultimate DIY Retirement Portfolio.3 This guide will explain investing basics and give insight on the right tools to help set up the portfolio that meets your retirement goals.

If you have $500,000 or more to invest, get this guide to learn our ideas on the step-by-step process of building and maintaining a retirement portfolio that will potentially help you reach your goals and enjoy a secure retirement.

Disclosure

1 NY Times. 2022. https://www.nytimes.com/2022/09/09/business/retirement/retirement-downsizing-real-estate.html

2 ZIM may amend or rescind the guide “How to Build Your Ultimate Retirement Portfolio” for any reason and at ZIM’s discretion.

3 ZIM may amend or rescind the guide “How to Build Your Ultimate Retirement Portfolio” for any reason and at ZIM’s discretion.

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This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. Do not act or rely upon the information and advice given in this publication without seeking the services of competent and professional legal, tax, or accounting counsel. Publication and distribution of this article is not intended to create, and the information contained herein does not constitute, an attorney-client relationship. No recommendation or advice is being given as to whether any investment or strategy is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole.

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Certain economic and market information contained herein has been obtained from published sources prepared by other parties. Zacks Investment Management does not assume any responsibility for the accuracy or completeness of such information. Further, no third party has assumed responsibility for independently verifying the information contained herein and accordingly no such persons make any representations with respect to the accuracy, completeness or reasonableness of the information provided herein. Unless otherwise indicated, market analysis and conclusions are based upon opinions or assumptions that Zacks Investment Management considers to be reasonable.

Any investment inherently involves a high degree of risk, beyond any specific risks discussed herein.

It is not possible to invest directly in an index. Investors pursuing a strategy similar to an index may experience higher or lower returns, which will be reduced by fees and expenses.

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