September 16, 2017

Should You Continue To Invest After Retirement?


I am not sure I have ever written about this subject before. Satisfying Retirement is not a financial blog, but our monetary resources are an important part of how well we live, so it is not a subject I ignore. If you search the archives there are plenty of blog posts about preparing yourself for retirement, managing your money, budgeting, and all the basic steps that help keep us financially afloat.

But, what about after retirement...are we done investing new money? Do we take what we have and figure that is what has to last for the rest of our lives? I can only speak for me, but, yes, that has been my assumption. After all, I don't work anymore. I have no "extra" income do I? What would I use to invest?

Actually,  the more I thought about it, the more obvious became the fact that I do have money to invest. Maybe my days of making fresh financial decisions are not over. Here are some of my thoughts:

1) In an earlier post I mentioned that my wife will begin receiving spousal benefits from Social Security early in 2019. Our first thought was to just toss that extra income in our travel and vacation fund, and that still might happen. But, we could put it into one of our investment accounts and let it grow. If we don't need it down the road, the kids' inheritance would be a bit larger.

2) While not everyone's case, I have yet to start taking money from my IRA. In less than two years that will change. I will have to start withdrawing money.   The Required Minimum Distribution is the government's way to insure it begins to get some taxes from the money that has been safely tucked away and growing the last 30+ years.

Like the spousal benefits, I have been living without IRA money for the past few years, I don't see that changing anytime soon. So, that forced withdrawal can be invested. I will have to check on the tax ramifications; it would be counterproductive for that money to be taxed twice. But, it is possible.

3) The inheritance I received from my parents generates money. Because we live a modest lifestyle most of the time that inheritance generates more money than we spend each year. Our financial advisor automatically reinvests whatever there is. If I don't see the extra, I am not tempted to spend it.

4) At the end of some years there is leftover cash. Expenses were lower than we had budgeted for. This post that has forced me to consider alternatives. We have just rolled that money over into the next year allowing for more money in certain budget categories for the new year. But, we could take the unspent funds and plug it back into investment accounts.


I guess all this begs the question: why would I want to keep investing? For me, there are two answers: I am naturally conservative and I don't know what the future holds. Honestly, I don't know which, if any, of these ideas I will follow. But, just knowing that investing after retirement is not such a far-fetched idea has been helpful.


23 comments:

  1. Hopefully we have another 10, 20 or more years to make some money. Also I'll be withdrawing more from my IRA than I'll need so the RMD doesn't force me to pay taxes on my SS. Having all that cash sitting there earning 1% goes against my grain. The only scary thing is to have another finicial crisis.

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    1. I am not sure I follow what you are saying. Unless the RMD is from a Roth, then you will pay taxes on it and it counts as income. When you add the RMD and Social Security together won't that determine your total yearly income that is likely to trigger taxes on your Social Security?

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    2. If your income exceeds a certain level then they will start to tax your SS benefits. https://www.ssa.gov/planners/taxes.html So I'm planning on withdrawing more from my IRA than I need to keep the RMD below this level.

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    3. Yes, taxes on your Social Security are triggered by your total yearly income. Whether it is a withdrawal from your IRA that you determine, or an RMD from your IRA that the government determines, if the total amount taken from your IRA (regardless of what it is called), added to your yearly Social Security amount shown on your SSA-1099, is what determines whether you owe taxes on SS.

      Or, are you saying you will be withdrawing money from your IRA before you start taking Social Security, with the plan to keep your eventual RMD low enough that, when added to your Social Security, you will be below the taxable level?

      This is a good point for reader to be sure they understand, so I am glad we can have this back and forth clarification.

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    4. It's the latter, reducing my RMD so that when I withdraw my SS at 70 it is taxed at a minimum.

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  2. We do not invest. Our money is in Money Market Funds. Not making much these days but we believe we are safe. That is more important to us.

    What we do is live on our NET income from SocSec and my wife's retirement from teaching. Plus a small annuity from one of my old jobs. Our monthly totals, net after taxes, plus what they take out for Medicare is $4800/month. Not a lot by any means. However, our expenses are less than $3200/month. So, we feel if we keep our expenses down we have extra money to play with. We do not take river cruises in Europe, hike to Machu Piccu (sp?) or walk the Great Wall. But we go to Santa Fe/ Taos, The San Juan Islands above Seattle, trips to Naples, FL and Apalachicola,FL and other places that mean a lot to us within the continental US.
    I love cars, so we always drive a nice car. Didn't say brand new but older mint Jaguars that don't cost much to purchase or much to maintain, thanks to Ford when they owned them and halted the electronic issues, we save car money. And we get a lot of "thumbs up" along the road.
    But, returning to investing the only stock we have ever owned is Coca-Cola. They sell syrup. All over the world. I understand that. Did well for us for 25+ years and sold to fund retirement.

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    1. The percentage of equities we own is lower than most financial advisors and web sites suggest. But, like you, comfort is important for us at this time of our life. We are more likely to invest in corporate bonds and mutual funds that have historically done better than the market average and help beat inflation.

      So, if I follow through on any of the points above, the money would not be put into stocks,

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  3. I admire your financial strategy. But have you considered the possibility that you're not spending enuf. money? I get it that you want a financial cushion, for all the imponderables, but remember, you can't take it with you.

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    1. When I agreed to take the European River Cruise next year, I accepted that I can't take it with me, and I will spend the money to fulfill a dream. That's not to say it didn't make me question my decision for quite awhile.

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  4. Money market funds, almost by definition, lose money over time as the US dollar continues to lose value. A 5-cent Snickers bar when we were kids is now a dollar. I don't know the exact stats, but the dollar has lost more than 90% of its value over time. Given this, "safety" is perhaps not the best characterization.

    Unless you can live on SS + dividends (from companies that never cut their payout, regardless of the stock price), you need to have growth in your portfolio, and that means investing in the broader market, which has grown about 12% a year on average since 1926 -- but only if you leave your holdings alone and ride out the ups and downs. This, of course, runs contrary to human nature, which feels the pain of loss much more sharply than the pleasure of gains. But no one has successfully timed the market.

    I think our extended post-retirement lives require most of us to re-think the conventional wisdom about avoiding risk as we grow older, which might be 30 years or more of investing, long enough to stay way ahead of inflation if we don't bail out during rough patches. "Risk," as Wall Street uses the term, is much more about volatility than loss.

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    1. Money Market funds are paying virtually nothing in interest. My financial advisor has standing orders to alert me when some investment has cashed out. I don't want much cash just sitting there doing nothing.

      You are so right - the rules have changed because of how long we have to support ourselves, though at some point, there isn't enough time to recoup losses during a serious downturn in the market. When to become conservative is still a real guessing game.

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    2. Money Market funds are largely invested in non secured short-term securities; therefore,they are a higher risk than advertised with minimum return. Guaranteed Investment Certificates would be a better alternative.

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  5. I have continued to invest in retirement as I did before retiring. While we have a lot of our core holdings in stock funds/ETFs and bond funds, I do a reasonable amount of active stock buying and selling, as well as options trading. So yes, I continue to invest in retirement, including newly generated monies.

    I am also starting to move some $ from regular IRAs to Roth IRAs, to lessen the pain of RMDs down the road. Other than that I am always looking for ways to save, invest, and lower our taxes.

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    1. Options trading....you are playing with the big boys!

      Moving money from a regular IRA to a Roth has been suggested to me. I should take another look.

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    2. You need to do it soon. I think the option becomes complicated when you hit that magical 70 1/2. Also, it is not as effective once you have your full income (Betty's SS). We spent the last five years moving my husband's (67). We will spend the next five years moving mine (60). I wish we had started earlier. We are hoping to never tap our Roths and pass them, tax free, to our children.

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  6. My husband I were teachers for over 35 years and we have our pensions as we planned. However we do get concerned about the long term future payments. We save a little money every month. I have an account for medical expenses not covered by Medicare such as dental. We used some of that money for health aids when my husband had a serious operation with several months of recuperation. Health aids in your home are not covered by Medicare. We will be taking RMD next year and we are putting the money in more conservative investments but not without some growth. I am getting social security this year, my husband is not eligible and we are planning to spend part of it, put part of it into our medical account and adding some of it to the conservative investments.

    There has been little information or advise on what to do when you reach 70. Our financial advisors are good and they follow our directions but I know they (40 to 50 year olds) would rather we be more aggressive in our investing. This topic has been on my mind for the past year.

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    1. You mentioned a use for our extra money I hadn't considered...putting it aside for extra medical expenses, especially dental. Even though we have a dental discount plan that is a good value, dental care is darn expensive. Teeth wear out and my crowns will need replacement at some point. Good thought, Marianne.

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  7. Im actually trying to decide if it's feasable in retirement to begin investing again. I live benath my means and often wonder if instead of saving the difference between income and expensses and extra money I make. It would be different if the money market rates were anything at all. Sigh.

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    1. How true. It is hard to get motivated by money market rates of below 1%.

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  8. We are a split household. We, both, have been retired for three years. Being the younger member(60), without pensions, I used to worry much more then he (67), with pension, did. We do continue to invest in the market (mutual funds/stocks) as we did all through our lives through our IRAs ( 1/3 of our savings). We do not add extra money to those investments. We rarely spend our entire monthly retirement money (house and cars are paid off). We do the "envelope system" for our set expenses (propane, health care, taxes, presents) and a "sweep" of extra money for everything else. Right now we are still concentrating on grands (10,4,4,2,1,soon). Sixty seven hit us both hard. Time to regroup for some spending on us!
    It will be interesting to hear the next generation retire when women, more often, have their own savings and pensions by being in the workforce most of their lives.

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    1. If society finally accepts that women in the workforce should be paid on the same scale as men then things really could change for the better during retirement.

      Over the last few years we have been able to trim or rearrange our yearly expenses just by being aware of where the money goes. Getting rid of satellite TV, for example, allowed us to add a few streaming services (Netflix, Amazon, Britbox) as well as an antenna to pick up all the free local channels and still have money left over that goes into our monthly entertainment category for plays, concerts, and dining out.

      Our car budgets have been shrinking lately. Betty drives about 50 miles a week and I am probably at no more than 150, so we've been able to cut our gas budget, too.

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  9. Wife and I are having constant discussions about the financial end of retirement now as she is 3-4 yrs away and I'm around 6-7.....thanks to good jobs, with pensions(!!!!) and social security, and a 401-k, we will have a 5 legged stool upon which to rest.
    While there are thousands of variations to withdraw these funds, we have came to one conclusion about inheritances. We plan to dole out some of the accrued funds annually as they build to our children--5 of them and grandchildren--7 of them. Why hold onto these funds for the next 20-30 yrs, when our offspring can make the most of them now?? We plan to start by gifting each grandchild $10k to use with college tuition--or if no college for that child, to be used for a First home purchase. Then sons and spouses will get amounts of $10k--$25k, as we have extra monies, to help make a real difference in their standard of living NOW--not when they are retirement age themselves.....

    We realize that our situation is different than most, but we would like to see the difference we can make in their lives while we are still alive. Help payoff a home, fund a retirement acct for them--at least start one, or help with college for the grands. My wife is a teacher and neither of us would have succeeded in life without a little jump start or a college education. We hope to see the fruits of what we are sowing while still here....that's my idea of a satisfying retirement!!

    PS--love your blog. My wife is considering starting one as she loves writing--after retirement.

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    1. While there are those who disagree, my wife and I are in your camp: we have notified each grandchild he or she has $10K for a college fund from us when needed. We realize $10,000 for college won't go very far in another 7-10 years, but it is a start for them. Each daughter gets some of their inheritance each Christmas under the same theory that they can use the extra money now. We will also add a few thousand as needed to help the grandkids with special activities or interests that they would have to otherwise skip. None of this effects us in our daily life at all. It is our belief it is going to be their money anyway!

      I worked for myself for most of my career, or with companies that didn't offer pensions. When I read about you lucky folks who have that nice part of the retirement package, I wonder what it would be like!

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