We often read articles majoring on the importance of investing "for" retirement, but it's equally important to continue to invest after your retirement date.After all, having spent all those years accumulating your retirement pot, you will want to make sure that your money continues to work hard for you. The chances are that you don't want to have to re-enter the workforce, so your accumulated investments need to be capable of providing a comfortable standard of living for you and any dependants.
Sometimes, when people hear the word investment, they automatically assume that we are talking about the ability to generate capital growth. It's important to note, however, that investment can also be about generating a regulr income. For example, when we purchase shares we hope that they will generate dividend payments and any additional capital growth (from the rising value of the shares) may just be a nice bonus.
Usually, when a person retires, their principal concern is to obtain a regular income that will sustain their standard of living. This is achieved partly through the ongoing agreed pension income but, also, through purchasing annuities, getting interest from bonds and savings accounts, and via dividends from shares. An annuity is usually taken out at the point of retirement, funded from a pension lump sum payment. However, opportunities to benefit from competitively-priced bonds or to add to your stock portfolio are likely to continue to crop up.
There is obviously a degree of risk associated with investments, and for people in their sixties or seventies there may be a shorter time window to generate a personal windfall. However, people are living longer than in previous generations and someone who retires aged sixty may still have a good twenty to thirty years of good health to look forward to. This is a perfectly viable timeframe to generate some very tasty returns from investments. There is also the added factor that investments can be passed on to loved ones, thereby meaning that your skill as an investor will continue to benefit your family long after you have departed the scene.
Alongside income generation, further capital growth is also desirable and should be part of a retiree's goals. Most of us will already be familiar with the fact that inflation erodes the value of our money. This is why $1,000 does not have the same purchasing power that it had in your parents' or grandparents' day. The danger with putting all of your accumulated money into generating a fixed income, therefore, is that you may see a gradual deterioration in the value of that income. Continuing to invest some money towards the goal of capital appreciation will help mitigate against this threat.
Another reason why people may need or wish to continue to invest during their retirement is to make up any shortfall between the retirement income that they are seeking and the retirement income that they have targeted. Many people don't start to think about pensions and retirement provisions until quite late into their working careers, leaving too little time to meet their full retirement monetary needs.
And then there's provisioning for potential future needs. In particular, the threat of ill health in our later years means that health treatment or nursing care may become necessary. Or there may be a need to adapt your house with chairlifts, etc. It's not possible to predict the future. Hopefully nothing bad will happen but it's sensible to seek to provision for additional costs.
Summary:
Investment plays a key role in people's long-term financial wellbeing. It's certainly true that it is important in the years leading up to your retirment date but it does not follow that you should abandon investment strategies once you have retired. Indeed, for many people, retirement may provide more time to properly research investment opportunities and to benefit from the learning that they have built up in preceding years. There are several reasons why ongoing investment is important, including the need to counter the erosive effects of inflation and the need to make up potential retirement shortfalls. Investment is also something that many people find that they are good at and enjoy. The investment goals may therefore alter slightly but there can still be great value to be had from prudent investment, weighing up both the risk and potential reward.