Grow Financial Federal Credit Union
February 14, 2019

Creating an Investing Road Map for Retirement

Set Retirement Goals.

Setting goals for retirement is an important part of retirement investing. For example, do you want to retire early? Would you like to travel during retirement? Do you plan on working post-retirement? Having goals can help you and your financial professional develop an appropriate investment plan for retirement.

Think About Your Time Horizon.

One of the first goals you should ask yourself before you invest for retirement is, “When will I need the money?” Will it be in three years or 30? Your time horizon for when you would like to retire will have a significant impact on your retirement investment strategy.

The general rule is: the longer your time horizon, the more risky (and potentially more lucrative) investments you may be able to make. Many financial professionals believe that with a longer time horizon, you can ride out fluctuations in your investments for the potential greater longer-term returns. On the other hand, if your time horizon is very short, you may want to concentrate your investments in less risky vehicles because you may not have enough time to recoup losses should they occur.

Understand Your Risk Tolerance.

Another important question is, “What is my investment risk tolerance?” How do you feel about the potential of losing your hard-earned money? Many investors would forgo the possibility of a large gain if they knew there was also the possibility of a large loss. Other investors are more willing to take on greater risk to try to achieve a higher return. You can’t completely avoid risk when it comes to investing, but it’s possible to manage it.

Almost universally, when financial professionals or the media talk about investment risk, their focus is on price volatility. Advisors label as aggressive or risky an investment whose price has been prone to dramatic ups and downs in the past or that involves substantial uncertainty and unpredictability. Assets whose prices historically have experienced a narrower range of peaks and valleys are considered more conservative.

In general, the risk-reward relationship makes sense to most people. After all, no sensible person would make a higher-risk investment without the prospect of a higher reward for taking that risk. That is the tradeoff. As an investor, your goal is to maximize returns without taking on more risk than is necessary or comfortable for you. If you find that you can’t sleep at night because you’re worrying about your investments, you’ve probably assumed too much risk. On the other hand, returns that are too low may leave you unable to reach your retirement goals.

The concept of risk tolerance refers not only to your willingness to assume risk but also to your financial ability to endure the consequences of loss. That has to do with your stage in life, how soon you’ll need the money for retirement and your retirement goals.

Remember Your Liquidity Needs.

Liquidity refers to how quickly you can convert investments into cash. For example, as an investment, your home would be considered relatively illiquid, since it can take a very long time to sell. Publicly traded stock, on the other hand, tends to be fairly liquid.

Your need for liquidity will affect the types of investments you choose to meet your retirement goals. For example, if you have an emergency fund, you’re in good health and your job is secure, you may be willing to hold some less liquid investments that may have higher potential for gain. However, you probably don’t want to invest money you’ll need in the next couple of years in less liquid assets. Also, having some relatively liquid investments may help protect you from having to sell others when their prices are down.

Questions? Contact a CFS Financial Advisor.

Grow has contracted with CUSO Financial Services, L.P. (CFS) to provide investment services, and your CFS Financial Advisor will help you build a plan that meets your needs. The advisor will look at your current spending, saving and investing, learn about your goals and priorities, make objective recommendations and support your efforts moving forward through the implementation and management of your plan.

CFS Financial Advisors are available by appointment. Click here for the financial advisor in your area and schedule your complimentary consultation today.

Non-deposit investment products and services are offered through CUSO Financial Services, L.P. (“CFS”), a registered broker-dealer (Member FINRA/SIPC) and SEC Registered Investment Advisor. Products offered through CFS: are not NCUA/NCUSIF or otherwise federally insured, are not guarantees or obligations of the credit union, and may involve investment risk including possible loss of principal. Investment Representatives are registered through CFS. The Credit Union has contracted with CFS to make non-deposit investment products and services available to credit union members. For specific tax advice, please consult a qualified tax professional.

Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2019.


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