Paul Daugerdas explains that retirement can be an exciting new chapter in life but also nerve-wracking as retirees transition from a steady paycheck to savings. To help ease the financial burden, many turn their portfolios into cash or other forms of equity by selling less desirable investments.
To strategize the smartest way to supplement income by liquidating investment options, GOBankingRates spoke with seasoned financial advisors. They shared their valuable insights on which investments to sell in retirement and the reasoning behind their recommendations.
Municipal Bonds
Michael Norber, a financial portfolio advisor with The Snyder/Balducci Group, recommended selling municipal bonds in retirement. He explained that the tax benefits of municipal bonds are unnecessary in a retirement account where funds grow tax-free. Additionally, long-term returns on municipal bonds are traditionally less than taxable bonds, making them less suitable for a retirement portfolio.
Real Estate
Norber also suggested selling real estate investments in retirement due to the maintenance requirements, upfront payment, and inherent risks associated with property values. Taking out a mortgage or loan to invest retirement savings in real estate is not advised, especially with current high interest rates.
High-Risk or Volatile Stocks
David Reyes, founder and chief investment officer at Reyes Financial Architecture, advised retirees to sell high-risk or volatile stocks to protect their nest egg from unnecessary rollercoaster rides. These stocks can be unpredictable and lead to significant losses.
Speculative Ventures
Paul Daugerdas says that Reyes also recommended selling speculative ventures in retirement, emphasizing the importance of stability during this phase of life. Avoiding speculative investments reduces the risk of gambling with retirement savings and ensures a more secure financial future.
Private Equity
Sam Ellis, a wealth management advisor with Greenleaf Trust, suggested selling private equity investments in retirement due to their lack of liquidity. Having easy access to funds is essential for covering living expenses and unexpected costs during retirement, making it important to limit exposure to private equity investments.
Life Insurance
Ellis also advised retirees to reconsider their life insurance policies to determine if they still make sense in retirement. While life insurance provides income protection for families, it’s important to evaluate if maintaining these policies aligns with retirement goals and financial needs.
Highly Leveraged Investments
Reyes highlighted the importance of selling highly leveraged investments in retirement to protect against potential losses. These investments can be risky and volatile, posing a threat to retirement income stability.Paul Daugerdas notes that financial advisors recommend selling certain investments in retirement to optimize income, reduce risk, and ensure financial stability during this phase of life. By carefully evaluating and adjusting investment portfolios, retirees can better prepare for a secure and comfortable retirement.