Where Should Retirees Put Their Retirement Money?

By Charles O. Posnecker IV, CFA, CFP®, CTFA | Published: June 2022

When it comes to investments and retirement, retirees are in a precarious position. You have accumulated a retirement nest egg, but now you face new unknowns around life expectancy, quality of life and your health. And not to be forgotten is how best to invest those hard-earned savings. Should you stick with stocks and their inherent volatility? Or do you move more into fixed income, despite their lower yields?

The first step in any plan is to know how much you have in assets and what your spending rate is. From there, you can get an understanding of a target asset mix of cash, stocks, and bonds that works best for you. The optimal asset mix is the one that lets you sleep comfortably at night, which ideally will be a balanced approach utilizing each asset class.

Keep in mind that even at retirement age, you may still have a long investment horizon of twenty or more years, which may mean multiple market cycles.

Cash Investments
Given that unforeseen circumstances may require you to withdraw from your portfolio when you least expect to, it is best to have some cash on hand for emergencies, ideally three to six months’ worth.

You may want to look for high-yield savings accounts, which are FDIC-insured and earn more than regular savings accounts. They will not make you rich but will help avoid needing to sell from your portfolio prematurely or when the markets are down.

Certificates of deposit may also be an option, but often come with early withdrawal penalties where you forfeit some of the interest earned. Series I bonds sold by the U.S. Treasury have also come into fashion and are currently attractive, though they come with low purchase amount limits and must be held for a period of time to earn interest.

Fixed Income Investments
Fixed income likely also won’t make you rich, but it should keep you well-positioned. The days of earning 5%+ on your bonds to stay ahead of inflation have been gone for a while.

That said, they also are much less volatile than stocks. The stock market has experienced Black Monday, Black Tuesday and the Global Financial Crisis, but rarely do we see significant bond market downturns.

Bonds also generally move opposite to stocks, providing a ballast in times of turmoil, so if the markets are down, it can be a great time to rebalance your portfolio. If you want to favor liquidity, you can look to U.S. Treasuries, investment grade corporate bonds, and low-cost index ETFs (exchange-traded funds), which may own thousands of bonds and provide diversification. Be wary of yields that appear too good to be true.

Equity Investments
We’ve seen a number of high-performing stocks and funds recently, but remember that past performance is no predictor of future success. If you prefer individual stocks, you can focus on those durable companies that have weathered multiple economic cycles and have good management in place. A good rule of thumb is to monitor your concentrations to make sure you have proper diversification and aren’t putting all of your eggs in one basket.

Low-cost index ETFs (exchange-traded funds) covering the broader stock market are also an option if you do not want to follow specific companies. ETFs are usually more tax efficient than mutual funds as well. And most importantly, trying to time the market in the short term is a recipe for disaster and akin to gambling, not investing. No one can predict with certainty where stocks will go in the next couple years, let alone the next couple months, but history shows that over a long enough period markets will grow up and to the right.

With no wages coming in the door, having a plan for your investments is that much more important. A financial advisor can take into consideration not just your financial assets, but various other factors.

Financial planning software today allows for detailed forecasting to set your expectations and recommend corrective action. Similar to a doctor, a good advisor can diagnose what is and is not working, giving you a framework for life in retirement and ensuring that your goals are met.

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About the Author – Charles O. Posnecker IV, CFA, CFP^®, CTFA
Chuck Posnecker joined Cypress Capital Management in 2017 after working for Christiana Trust, a division of WSFS Bank, for 12 years in their personal trust and investment groups. He graduated from the University of Nevada, Las Vegas, where he received his BSBA in International Business (2002) and MBA-Finance concentration (2005). Chuck is also a graduate of the Pennsylvania Bankers Association School of Trust, Investments & Relationship Management, where he completed a three-year program focused on various aspects of trust administration and investments. Chuck obtained his Certified Trust & Financial Advisor designation in 2011, his Chartered Financial Analyst designation in 2016 and earned the CFP^® certification in 2019.

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