4 rules to live by in retirement

Investing for retirement requires commitment and adherence to a plan over time. But for many clients, the transition from saving money to living off those savings can be unexpectedly fraught with difficulty. They may struggle with the tax implications of withdrawals, as well as when to start making them, how much to withdraw and how often. This month’s Global View focuses on a few rules they can live by:

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Rule No. 1: Come up with a plan for doling out the cash. As this Kiplinger article by Bryan S. Slovon points out, clients shouldn’t mistake an investment portfolio for a solid income strategy. They’ll need to figure out a method for generating a steady income in retirement, while preserving assets during market fluctuations and having enough wiggle room to cover unexpected costs.

Rule No. 2: A client’s asset allocation plan should jibe with that person’s income strategy. MarketWatch columnist Dana Anspach points out the difficulty of maintaining a steady asset allocation plan in retirement, particularly when clients have multiple accounts. Most pertinent will be her discussion of two primary approaches to rebalancing in the withdrawal phase: systematic withdrawals and time segmentation.

Rule No. 3: Consider the tax implications of investments. It’s not enough to focus on returns. Clients need to take into account the tax rates associated with various investments. Gordon Pape’s Star article discusses how clients can cut their investment tax bill.

Rule No. 4: Focus on the happiness quotient. Writing for the Globe and Mail, Ian McGugan makes the case that instead of obsessing over portfolio returns, retirees should strive to generate the maximum amount of happiness from their accumulated wealth. The upshot: money matters when it comes to creating a satisfying retirement, but not as much as you’d think. Suggested investments include marriage counselling (to prepare clients for the forced togetherness of retirement), a little distance from the kids, and annuities (to reduce stress and because kids encourage spending).