5 Reasons Managing Your Portfolio During Retirement is Challenging

We struggle to save for retirement. A recent study found over 20% of Americans have not even started saving for retirement, while nearly one third had not been able to save more than $5000. 

Many people are struggling at step one: setting aside actual money or having money to set aside. But even the most diligent investor can find themselves doubting and worrying about whether they have saved enough money to sustain a comfortable lifestyle for years to come.

If it is difficult saving money and managing your portfolio before you retire, then investment management after you retire may be more difficult.  Before retirement, you add money to your investments. The biggest concern you have is determining where to invest the money you add. No one would claim that task is easy, but it is nothing compared to the moment when you stop adding money regularly and begin to withdraw it instead.

The difficulty lies in the unknown future and how your strategy will uphold the test of time.

1. Life Expectancy 

No one wants to spend a lot of time thinking about their impending death. Saving money for an unknowable date is not easy because no one really knows how long they will live. Retirement planning always involves an estimate somewhere, whether it is how long you will live, how long your spouse will live, or how long any dependents may be relying on your income. It might be a pleasant surprise to live longer than you plan, but it will not be as enjoyable if you potentially outlive your retirement investments. One way to minimize this chance is to stay conservative in your estimates of how long you and your spouse may live.

2. Withdrawal/Spending Rates 

How much money will you need to spend each month to maintain your lifestyle in retirement? What withdrawal rate will allow you to maximize your investments after they become your main source of income? Conservative estimates vary between simple rules such as spending 4% of assets in a year or more complicated rules which consider market performance. It may be complicated enough to exercise the discipline needed to stay under your spending limits. Withdrawing from your investments may make it more difficult to maximize the return on your investments. This balance between earning and spending money can make managing your portfolio during retirement challenges.

3. Risk and Market Cycles

We know the market usually moves in cycles and we know keeping a cool head is key to retirement investing success. But that does not change the fact that it is psychologically more difficult to stay conservative when the market is booming and to properly cut our expenses to reflect losses when the markets are retreating. It is natural for people to plan to make adjustments later, at some other ill-defined point in time. After all, that is the reason so many Americans are dragging their feet about saving money in the first place. But during retirement, it is important to have the discipline needed to stay the course.

4. Liquidation Strategies

Planning which assets to liquidate may have a ripple effect on the rest of your retirement, for better or worse. The main goal is to first liquidate the assets that have the lowest potential long-term return. This leaves the assets with higher potential returns to continue to appreciate, while you make withdrawals from the asset with lower potential returns. One way to minimize the risk is to liquidate your assets as evenly as possible, withdrawing money from each asset class in proportion to the others. Spreading the money out among assets classes may lower the risk in the long run. 

5. Pending SS Meltdown

Most people agree that Social Security may be heading towards some major problems, and our political system seems perpetually gridlocked to do anything about it one way or the other. If and when the Social Security fund dips below one year’s worth of payments, one possible solution will be for outgoing payments to be decreased to a level that matches the amount of money expected to come into the fund through payments. It is hard to imagine legislation passing that increases Social Security taxes, so the most likely result is a potential decrease in Social Security payments. That could happen through political action, or it could happen by necessity when the fund no longer has assets that are greater than its liabilities.

This may sound like an overly negative topic, but the only thing more unsettling about retirement planning is not planning for retirement at all. It is critical that you understand the challenges facing you as you plan your retirement and the potential obstacles lying ahead for those in retirement now.

New Study Finds Millennials Lack Confidence In Their Investment Knowledge

A study co-sponsored by CFA Institute and FINRA examined the relationship between Millennials and investing. For anyone keeping abreast of the conversation surrounding Millennials and financial literacy, their results might be something of a surprise.

Millennials are commonly explained as tech savvy, informed individuals who are confident making their own financial decisions in an increasingly tech-integrated approach. The generation has been widely credited for the rising robo-advisor trend, among other innovations in investments. It has long been said that Millennials struggle to save due to burdens of large debt and stagnant wages. While these are not to be dismissed, the research by the CFA and FINRA < > reported that 39% of Millennials who are not currently investing say that lack of knowledge is their biggest barrier.

The myth-busting does not stop there. The study also found that only 21% of Millennials are confident about financial decisions. That means 79% of Millennials doubt their financial decisions, far from the overconfident and impatient persona they are so often made to wear.

Instead of embracing automated solutions like robo-advisors, 58% of Millennials would prefer to work with a financial professional in-person to make investment decisions. This is a similar number found in older generations, suggesting that robo-advisors may not live up to their current trendy projections. Conventional thinking suggests that Millennials have a mistrust of financial professionals and products. However, this study found that 72% of Millennials who work with a financial professional are satisfied with the experience and that only a small percentage of Millennials mistrusted these professionals.

Millennials are sometimes described as having a sense of entitlement and an impatience for the sort of long-term wealth-building necessary for a comfortable retirement. This research suggests that in truth, Millennials have smaller or similar financial goals than their parents and grandparents had. Instead of impatience, lack of investment literacy is the primary barrier they face when it comes to investing.

Arguably, the most important myth to debunk about Millennials is that making generalizations about Millennials is difficult. Rather than being a group of people with similar worldviews, Millennials are a diverse generation with a wide variety of views and attitudes, particularly about investing.

How and Why to Calculate Your Net Worth

Net worth is a term that refers to the sum of your assets after subtracting your liabilities. Calculating your net worth allows you insight into your financial situation at any given moment. It is a snapshot of your money and investments, but it is not static. It changes over time as you earn, save, and spend money. That ever-changing aspect of net worth is where the real value of tracking and calculating it lies.

When a person tracks their net worth over time, they are recording data that can help them analyze the performance of their financial decisions. The process of calculating net worth requires examining all of your assets and liabilities, which may unearth potential problems or inspire ideas for potential growth. Watching net worth change over time may also allow an individual to see how their net worth may change in the future.

How to Calculate Net Worth

A simple spreadsheet, a calculator, and access to your financial accounts are tools that you need to calculate your net worth. The first step is to list all of your assets and liabilities. Assets may include cash on hand, savings accounts, property, retirement investments, and other kinds of long and short term investments. Liabilities may include a mortgage, credit card debt, student loan debt, lines of credit, car loans and other debts that must be paid back over time.

Once you have listed each investment, add up the total of your investments and subtract the total sum or your liabilities. The result is a theoretical amount meant to represent how much money you might have if you sold all of your assets and paid back all of your liabilities, also known as your total net worth.

Calculating Net Worth To Reflect

By calculating their net worth, an individual has the chance to take a step back and consider their finances from a bird’s eye view. If you are not in the habit of checking your net worth, the end number may come as a surprise to you. One individual might be surprised to see the total amount of credit card debt they have accumulated, while another individual might be pleased to discover how much equity they have in their home or the health of their assets. By reflecting on how your calculated net worth is different from your predictions, you may be able to make more informed and productive financial decisions for the future.

Calculating Net Worth For Financial Decision-Making 

Over time, as your financial situation changes, so will your net worth. There are a number of questions you may ask yourself in order to better analyze the data you are collecting.

●      How is my net worth changing over time?

●      How do those changes align with changes to my lifestyle?

●      What are the biggest assets and liabilities impacting my net worth?

●      Could I make any simple changes that would have a positive impact on my net worth in the future?

●      Is my long-term strategy performing as expected, or are adjustments in order?

●      Projecting my net worth into the future, am I on track to meet my goals in retirement? 

Calculating your net worth may inspire you to rebalance your portfolio, clear debt, increase savings, adjust your investment strategy, or to stay on track without making any changes at all. It helps you make more informed financial decisions.

Comparing Mutual Funds With Exchange-Traded Funds

Mutual Funds and ETFs (exchange-traded funds) may be attractive to investors because they commonly offer diversification and professional management for a comparatively low cost compared to some other types of investments. The range of types of funds available to investors allow access to a range of investment strategies and philosophies. Mutual funds and ETFs are similar in many ways, but it is important to note their differences as well.

An investment fund is a portfolio of investments that many investors put their money into together. This may decrease exposure to risk and can allow both beginners and more experience investors to tap into a diverse investment. Mutual funds and ETFs represent a range of investment styles and strategies.

Mutual funds date back as far in history as 1924. ETFs, however, have only been in existence since 1993. Despite being a more recent investment product, ETFs are gaining in popularity.

What Is The Difference: ETF and Mutual Fund

Perhaps the biggest difference between an exchange-traded fund and a mutual fund is in the way they are traded.

Mutual funds are purchased either from a broker or from the mutual fund company. The net asset value of the fund is calculated as the market closes each day, and all of the buy or sell orders that have been placed throughout the day will execute at this time.  

ETFs are traded through an exchange, as the name suggests. An ETF calculates its NAV at the end of the trading day similarly to a mutual fund, but investors  can purchase shares at market value, throughout the day.  This is an important distinction from a mutual fund.


When it comes to fees, one of the biggest factors in comparing expense ratios is whether the investment is passively or actively managed. Similarly, both types of funds represent such a wide range of characteristics that it is impossible to say that one has a typically larger expense ratio than the other.

Rather, each type of fund has certain common fees that investors should keep an eye on. For example, ETF investors are sometimes responsible for brokerage fees, while mutual funds are may or may not have a sales charge associated with the purchase. Account fees, redemptions fees, commissions, and more may all be be part of the costs associated with a mutual fund. 

The fees and expense ratio of each individual fund will be located in the prospectus. While both mutual funds and ETFs may have y lower fees that other types of investments, small fees may have large compounding effects on the total investment return. This makes it important to analyze each investment to ascertain the total cost of owning it prior to making a purchase.

Similar But Not The Same

ETFs and mutual funds have some marked differences. It is important, as an investor, to understand the investments and financial products you purchase. At the same time, both ETFs and mutual funds are available to represent the full range of conservative to aggressive investment strategies. No matter your investment strategy, investing in a  mutual fund or an ETF  may provide a diverse portfolio.

Bonds: A Beginner's Guide to A Classic Investment

A bond is a way for an investor to loan money to a company or government. When you buy a bond, the company uses your money to invest in the company and pays you an interest rate. Most bonds pay interest annually or semiannually. When the bond matures the face value of the bond is paid to you as a return of principal. 

Depending on the length until the maturity date of the bond, an investment in bonds may be a short, medium, or long-term investment. Bonds can be for any length of time and may command a higher return with longer maturities.

A bond is a simple-to-understand investment that gets a little more complicated when you buy and sell bonds instead of holding them. The price of a bond is influenced by interest rates, meaning a bond’s par value can change from the time you buy it to the time you sell it. If the interest rate goes up the value of the bond tends to decrease. If the interest rates go down, then the price of your bond would tend to increase.

Types of Bonds

Some bonds have a greater potential yield than others. One bond may have less chance of being defaulted on than another bond. The first thing to understand about what makes bonds different from one another is who issued the bonds and what type they are.

  • US Treasury Securities- “Backed by the full faith and credit” of the United States, the United States Treasury would have to be in a state of major economic catastrophe for these bonds to be defaulted on. Prices rise and fall on the market, but there is very little chance the investment will lose significant value while you hold it.
  • US Savings Bonds- Also issued by the federal government. These are simple and straightforward. They can be purchased in small amounts, making it an accessible option for people who do not have a lot of money to invest.
  • Municipal Bonds- These are issued by non-federal government bodies such as states, cities, and counties. Many municipal bonds support specific projects, such as purchasing new fire department equipment or repairing roads.
  • Corporate Bonds- Are issued by all kinds of companies. Corporate bonds are segmented by the types of industry, according to the company that offers them. Being backed by a company instead of a government body means that there is a larger chance the bond could be defaulted on if the company goes under.
  • Bonds in International and Emerging Markets- These are bonds issued by governments or companies that are not in the United States. Although international and emerging markets can be used to diversify a portfolio, they carry a separate set of considerations than other types of domestic investments.

This is not an exhaustive list. There are many more kinds of bonds you can invest in, including some that are complicated to understand. Just like any other kind of investment, you must perform the due diligence required to make sure you’re investing in bonds that are right for you and your investment strategy.

A diverse portfolio holds many types of investments, and bonds tend to play a role of stability and income. That diversification continues to be important even as beginner investors gain experience and experiment with more aggressive investments. The conservative nature of bonds make them an investment worth considering for young and experienced investors alike.