Allocation of Resources in Retirement

There are no magic bullets when it comes to the allocation of resources in retirement. Although everyone’s situation is different, some concerns are shared by most people who are retired. How those concerns are addressed is where individual retirement planning shines and becomes most useful in providing confidence for those in the remaining years of their lives.

Personal care for those who can no longer care for themselves takes on very different forms. The location of the care and the extent of the care provided dictate costs varying from $ 5,000 to $ 10,000 per month. Home health care is between $ 25 and $ 40 per hour and usually includes a four-hour minimum. Moderate-cost assisted living facilities are becoming more common in residential communities in formerly private homes. I know of some for about $ 6,000 per month. I’m not recommending the purchase of Long Term Care Insurance, just pointing out that the likelihood of needing care is very high and it needs to be incorporated into everyone’s retirement plan, i.e. how would I pay for my or my spouse’s care? For those who can qualify, life insurance can advance the death benefit for those who become chronically ill.

Stock market volatility is a concern to those near retirement and an even greater concern to people who are retired. Holding a higher percentage of bonds in a portfolio is a common strategy as people become more risk-averse. Diversification is not as easy as it sounds. I have seen statements of retirees’ investment accounts that held multiple mutual funds. Upon careful examination, many of the mutual funds had redundancies, i.e. each owned Microsoft, Apple, and Google. It’s not that these are poor stocks to own, just that if you have several mutual funds and each owns similar stocks, you’re not really diversified. Better choices could include different funds geared toward value stocks, dividend-paying stocks, and growth stocks. With investment management different in each, duplication would be less likely. Some investments offer buffering which provides downside protection in exchange for upside caps. Index annuities offer an alternative to the market. They have less liquidity but since retirement funds are meant to last for years, the advantages far outweigh the drawbacks. Also with bond interest rates at a near all-time high, the performance of index annuities can compete with stock market returns.

Although some have made significant returns in cryptocurrency, it is much too volatile. It makes investing in the stock market seem like putting money in a savings account.
Precious metals are a good long-term hedge against inflation. I say long-term because there are commissions to purchase gold and silver and commissions when you sell them, so short-term investments in precious metals may not be wise.

It goes without saying that everyone, retired or not, should have savings for emergencies. Right now banks and many other financial institutions are offering CDs and money market accounts with interest in excess of five percent. Shop around….many of the CDs have NO penalties.