What’s next? First there were huge legislative changes at the end of 2019 that have complicated retirement planning. Then COVID…. And we thought the stock market volatility was bad in March 2020. Nope. Thanks to COVID and supply chain dysfunctions, resulting in levels of inflation we haven’t seen in over 40 years, we are now dealing with multiple increases in interest rates in 2022 (3% increase in the fed rate to date with two more potential interest rate increases in 2022) along with erratic stock market behavior. And let’s not forget even more legislative changes that affect your retirement, in addition to the looming prospect of increasing tax rates. Had enough yet?
But let’s go back to my question, is there anything simple about retirement planning? Let’s look at your retirement portfolio. Why not take a minimalist approach with respect to your investments so you can devote time and energy to monitoring your withdrawal rate, right sizing your insurance coverage, and reducing the drag of taxes and fees on your retirement plan. And maybe have more time to dedicate to fun activities in your retirement!
Here are some easy steps to simplify your investment portfolio:
Streamline your investment accounts - You don’t need several Roth IRA or Traditional IRA accounts. Nor do you need several brokerage accounts. Keep all your investments in one account for each tax diversified strategy. Exception to this rule – if you have an inherited IRA account, you are younger than 59 ½ years old, and you need immediate access to the funds, do not consolidate the inherited IRA accounts with your individual IRA accounts to avoid paying a 10% penalty on the funds distributed from the inherited IRA accounts
Simplify your asset allocation within your investment accounts – Stop trying to beat the market with the purchase of stocks and expensive mutual funds which require active management. Compounding is the key to investing and being in the market will enable you to reap the benefits of compounding over the long-term. Over the last 189 years, the market has been up 71% of the time. For smaller investment accounts, use all-in-one allocation funds or target allocation funds based on year of retirement. For larger accounts, consider inexpensive, broad-market exchange traded funds (ETFs) or index funds. Keep it simple and review your investment portfolio at least annually to ensure your portfolio is in line with your investment strategy.
Simplify the number of investments in your investment accounts – You don’t need many investments in your accounts to diversify your investment portfolio. Keep your portfolio streamlined by eliminating holdings that you thought would provide diversification and/or returns but rather haven’t added to your portfolio’s risk/reward profile. Make sure you are not duplicating exposure found elsewhere in the portfolio by investing in, let’s say, multiple emerging market funds. These duplicate exposures can add more complexity and risk to your portfolio rather than improving the performance of your portfolio.
There you have it, investing made simple! As I have mentioned in prior posts, get started with investing now! Down markets are an opportune time to start accumulating wealth and/or build on that wealth for retirement! Think about it, everything is on sale right now in the stock market!
DISCLAIMERS:
All information provided by Hartmann CFO, LLC and Healthy in Retirement is intended for informational purposes only. The views expressed are personal opinions and should not be construed as financial or tax advice for your specific situation. Please make sure to do your own research or find a trusted financial professional, tax adviser or attorney before making any financial decision on your own.
Neither Hartmann CFO, LLC, Healthy in Retirement nor its owners make any representations as to the accuracy or suitability of the claims made here. Nor does Hartmann CFO, LLC, Healthy in Retirement, or its owners assume any liability regarding financial results based on the use of information provided here.