5 Ways to Retire with Less Investment Risk

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In my last post, I talked about what really matters about investment risk. The basic idea was that meeting your retirement planning goals should have a higher priority than staying within your risk tolerance. If you invest in a “safe” portfolio but don’t reach your goals, was it really a safe investment? I don’t think so.

Retirement Planning with Less RiskBut I also mentioned that there are some options if you don’t want to increase your investment risk in order to meet your goals. Some readers also brought up the fact that they want balance in their investing. They don’t want a portfolio that’s so volatile they can’t sleep at night. This is where you’re going to have to make some choices, and that’s what this article is about.

5 Ways to Retire with Less Investment Risk

If your current retirement plan requires you to take on more risk than you’d like to stomach, then you’ll have to adjust your goals accordingly. I’ve come up with five options that will help you find a way to balance your investment risk with your goals.

  1. Save More – If you want to choose a safer portfolio but keep your goals the same, the simplest solution is to save more. This is not the easiest solution by far, and for many people it may be extremely difficult. But if you want to use a retirement portfolio that’ll earn 6% instead of one that can earn 8%, then you’re going to have to save more money to meet your goals.
  2. Retire Later – You probably hate this idea, but it can have a huge impact on your ability to retire. Simply moving your retirement date to a couple years later can reduce the amount of money you need to retire. This means you can choose a safer, lower return investment because you’ll be saving longer, giving your money more time to grow, and spending fewer years in retirement.
  3. Spend Less – Another option is to lower your required income for retirement. By looking at ways you can spend less, you’ll lower the total amount you need to have saved. In turn, this can decrease the return you need on your investments and allow you to use the safer options. You don’t want to set yourself up to eat cat food during retirement, but you can certainly look at ways to save money. Since you won’t have the commitment of work to deal with, you can spend some time during retirement on frugal activities that lower your costs.
  4. Work Part-Time – Maybe there’s something you really love doing that you wouldn’t mind working at in retirement. If you can work part-time, you’ll bring in a little extra income that will reduce the amount you need from your retirement savings. Lower required savings means you won’t need as much risk to meet your goals. Be careful about counting on this option though. As you get older, the chances of disability greatly increase and that could really throw a wrench in your plans.
  5. Die Sooner – OK, I’m joking on this one! Sort of. I’m not saying you should go get an appointment with Dr. Kevorkian when you see your assets dwindling down. Suicide, assisted or not, isn’t the answer! But how long you’ll live does affect how much money you need to have saved. (Again, affecting how much of an investment return you need.) So refusing life-sustaining medical care that prolongs your life without enabling you to enjoy it can decrease the amount of risk you need to reach your goals. You could also spend the last few years of your retirement doing the exact opposite of what your doctors tell you – overeat, don’t exercise, smoke, drink heavily, and so on. Not something I’d want to do, but it’s your choice!

The Best Solution Is Balance

What I want you to realize is that you shouldn’t choose just one of these options. There’s a balance for you to find between your investment risk, retirement age, savings, spending, and what you’ll do in retirement. Sure, you could use CDs or rely on a Guaranteed Equity Bond as your sole investment option if you don’t want to retire until you’re 80.

But a better way would probably be to take on a little more investment risk (maybe with a conservative stock/bond portfolio), retire at 70, plan on spending a few thousand less, and figure on working part-time. Such a balance lets you enjoy a longer retirement without too much more risk. Playing around with a retirement calculator can help you see how these changes will affect your plans.

How Are You Finding Balance in Your Retirement Plans?

Let us know in the comments below!

(photo credit: Pedro Ribeiro Simoes)


  1. says

    All are great hints, but I like the idea of working part time best, especially if it is doing something you love to do. Retirees who continue to work seem to keep an edge with their finances and their foot in the door of opportunities that wouldn’t be available otherwise.

  2. says

    Thanks, Joe! I’d say that’s probably something I’ll do as well. I just can’t imagine sitting around all day doing nothing that’s useful to others! I’m saving for retirement not so I can stop working but so I can balance more time toward volunteering and less toward paid work. But planning on working part-time in retirement will allow me to give more during my working years since I won’t need quite as much for retirement. I’m thinking writing can be a good choice since it’s least likely to be affected by disabilities.

    Thanks for taking the time to share your thoughts!

  3. Alan Reed says

    Great advice! Planning for this next phase of life is critical. As baby boomers age, I am hoping more and more of them (me included) plan to continue to work or to volunteer instead of retiring to do nothing.

    One additional item to consider for retirement is health insurance. Especially if you retire or change careers early.

  4. says

    Thanks for your comment, Alan! I think many retirees will be forced to work in retirement due to the low savings rates and the possibility of reduced Social Security payments. I don’t of any politicians willing to do that, so I’m not too worried about it. But I do think we’ll see higher taxes.

    As far as health insurance goes, we’ll see how this whole government health care thing pans out. I’m not an expert on this though, so I can’t speak too much to it. I’m not endorsing my “Die Sooner” point above, but I do think part of the problem is our unwillingness to accept death. I think it’s a sad testament to Christians that many of us fear death as much as non-Christians – even though we have nothing to fear!

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