I was interested to see a spirited conversation on a blog post regarding retirement. Talk turned to the topic of the right way to invest for retirement. Should it be systematic investing with dollar-cost averaging or timing the market (buy low/sell high)?
But here is the other side of the coin on dollar-cost averaging and market timing on retirement savings: What are you going to
do when it’s time to start taking money out?
Most of us are used to running our households on the “paychecks” we receive once or twice a month from our employer. What happens when those checks stop and now you have to pick and choose from your retirement investments and decide which ones to keep and which ones to liquidate or draw from? The thought that goes through your head is probably, “I better not make a mistake or I could run out of income.”
I think managing investments for retirement income in the “distribution” phase is much scarier than figuring out how to invest during the “accumulation” phase. At least in the accumulation phase you have some time on your side. At distribution, there is no make-up time for investment mistakes or market downturns.
We should all look for some guarantees, at least for the recurring expenses such as housing, food, taxes, etc., that must be available no matter what. If you don’t feel equipped to do this on your own, I suggest looking for objective advice from an agent or advisor.
In addition, if you are still rebuilding your retirement nest egg after the Great Recession, it makes sense to look into life insurance to ensure that your spouse or partner would be OK if something happened to you before you reach that goal.
