Keeping Your Retirement Income Safe

When it comes to long term saving and investing, being a little careful or cautious can certainly save your life.

“To what end is work and the quest to wealth creation asides daily survival?”

If you occasionally feel this way, chances are that the big picture for your finances is not yet well defined. While the process of earning money and investing might seem futile and unending, the truth is that if you opted instead for a life without a clear financial system in place, you will feel even worse.

One of the reasons we are advised to invest is to reduce the stress of having to work hard for every naira of earning received. Yet, there is a truth that nothing is worse than accumulating wealth through hard work and your investments, only to lose it all.

When it comes to long term saving and investing, being a little careful or cautious can certainly save your life. As such, as opposed to freely making bold financial decisions and trying to make quick gains, the focus should now be on being able to keep your funds relatively safe while also having it grow at a steady pace.

Long term investments are oftentimes tied to retirement savings, so even though we know for a fact that volatility in the stock market is a norm, there must be systems in place to ensure that even when a general bear market strikes, you can absorb the shock and keep your money intact for when you really need it.

As your retirement draws closer, it is normal to panic or be anxious about the safety of your funds. This is why maintaining a more conservative investment strategy while also keeping your eyes on the prize so as not to be tempted to “live in the moment” is key.

Even though mistakes do happen, here are some very simple tips for keeping your retirement income safe:

Portfolio Diversification

No matter how many times we talk about the need to maintain a well-balanced investment portfolio, it will still be a worthy mention. By diversifying your portfolio, you carry out a reliable preventive measure towards risk control as opposed to waiting for things to fall apart before trying to save what’s left of your money.

Diversification is as simple as spreading your investment across asset classes, industries, risk levels and more.

Safety Over Huge Gains

In making investment decisions, your focus should be on ensuring safety. However, this does not mean you should focus on overly risk-free investments. It would interest you to know that extremely conservative investments can be as risky as the extremely aggressive ones.

This is because overly conservative ones expose your money to the risk of inflation and this will ultimately reduce the value of your money. Taking too much risk, of course, will send your money down the drain in a shorter period of time.

Have Some Cash

It is pertinent to note here that cash here does not refer to actual cash – not exactly. Cash investments are investments that are highly liquid and easily converted to cash like money market instruments.

One idea for having this is that knowing that certain expenses will necessarily come up like increasing health expenses, having these cash assets will prevent you from making abrupt poor investment decisions like selling your stocks are an unfavorable rate when the need arises.

Even when you have already retired, financial planners will advise that you hold on to these easy growing assets so as not to outlive your funds. You’re still going to need to make a little bit of money – albeit conservatively.

Be Careful With Withdrawals

While some will tell you to spend your money now instead of saving it for a future that might not come, as I stated in the last tip, there is also the possibility of you living longer than your investment assets.

Since one of the biggest risk factors to your money is you, there comes a need to be consciously careful with how you withdraw your funds. This is why it is better to maintain a very conservative withdrawal rate that can cover core expenses.

If you spend too much of your savings too fast, you might not have retirement income to fall back on when you actually need it.

Written by Lawretta Egba.