Managing retirement cash flow during market downturns

SPEAKER: Retirement brings with it many challenges. One of the most critical is ensuring your money lasts as long as your retirement does. To meet this challenge, you need to adjust your investment approach for this stage of your life. In the past, your focus was on accumulating wealth and letting your money grow over time. 
In retirement, your focus is on generating sustainable cash flow to sufficiently meet your needs, which brings with it greater sensitivity to fluctuating investment markets. Think about what might happen to your retirement strategy if your portfolio suffers a significant loss just before you retire or during retirement. 
In retirement, it can be harder to wait for the market to bounce back and recover lost ground. Your time horizon is not 10, 20, or 30 years down the road, but centered on meeting your immediate lifestyle needs. Since you're tapping those funds today, it becomes harder for your portfolio to recover from negative market moves. 
Keep in mind that allocating a large percentage of your retirement portfolio to fixed investments, such as bonds, does not protect you from risk. If interest rates rise, bonds you hold lose value in the market. That too can deplete your nest egg and have a negative impact on your potential spending. Bonds can be part of a diversified portfolio, but it's important to be strategic about your investment approach. 
One strategy to consider is to set a portion of your portfolio aside in assets with low or no risk of loss. This can include certificates of deposit, money market accounts, and short term fixed income investments. This is money you'll need to tap to meet your spending needs over the next few years. 
The rest of your portfolio is then available to be invested in a broader mix of appropriate assets, including equities, to potentially generate growth, position against possible negative moves in the market, and help offset inflation. 
If you've already retired or you are within five years of retirement, consider structuring your portfolio in a way that can meet your most immediate needs while mitigating against the risk of market downturns. This is a time when careful planning and a personalized investment approach can make a real difference.