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Investing in your 60s is a different ballgame than when you focused mostly on growing your retirement funds. When you crack into your retirement nest egg, you need to change your investment strategy. The idea is to withdraw enough to help you get by now while holding enough in reserve to finance the rest of your life.

Making the transition to investing in your 60s and beyond requires a new way of thinking about investments. Here are 11 pointers:

1. Estimate How Long Your Savings Must Last

You can’t plan effectively without an idea of how long your money should last. Of course you can’t know how long you’ll live, so we’re talking here about estimating the longest you might live, so you won’t run out of money.

A 65-year-old woman can expect to live to nearly 87, and a man the same age will live, on average, until 84, says the Social Security Administration, whose Life Expectancy Calculator gives a rough idea of expected lifespans. Or use The Wharton School of Business’ Life Expectancy Calculator for more-specific estimate based on your answers to questions about behavior, family history and health.

2. Calculate Annual Expenses

To plan your finances in retirement, you’ll need to know how much you need to live. Especially if money is tight, you’ll need specific spending data, not estimates. If you budget and have tracked your spending, you’ve got the data you need. If not, start now. There are online services that can do this, but a notebook or spreadsheet, to name a couple of alternatives, also will do — as long as you keep it up. After tracking for a few months, you’ll begin to see where your money’s going and can decide how much to withdraw from investments.

3. Fully Fund Emergency Savings

Keeping a cushion of savings in cash or short-term CDs lets you ride out market downturns without selling stocks at low valuations. Some experts advise having an emergency fund to support yourself for a year and a half to two years.

4. Plan Your Withdrawals

Retirees need a system for regular cash withdrawals. For example, one popular system suggests withdrawing 4% of your initial savings balance each year, then adjusting that amount annually for inflation. The creator of this approach, William Bengen, says savings split equally between stocks and bonds should last at least 30 years with this system. While, as he recently told The New York Times, the 4% rule “is not a law of nature,” it does provide a framework. The key is to adopt a system, then adjust it as necessary.

5. Seek Safety

How much you will keep in CDs, bonds and high-yield savings accounts depends somewhat on how much safety you require. Intelligent risk is necessary with part of your investments if you don’t want inflation to erode your portfolio’s value.

Many retirees follow this rule of thumb (called the “glide-path” rule):

  • Subtract your age from 100. The resulting number is the percentage of your investments you should hold in stocks.
  • Invest the remaining amount in bonds and money market funds.

If you’re 70, for example, keep 30% of your portfolio in stocks, including mutual funds and ETFs, and the remaining 70% in bonds.

Does this rule provide enough growth to keep a portfolio going strong? Experts disagree. Writes CNN Money:

[W]ith Americans living longer and longer, many financial planners are now recommending that the rule should be closer to 110 or 120 minus your age. That’s because if you need to make your money last longer, you’ll need the extra growth that stocks can provide.

Take a look at the results of various asset allocations at Vanguard’s portfolio allocation models. These illustrate the performance of various stock-bond mixes since 1926.

6. But Don’t Neglect Growth

The other end of the retirement seesaw is the need to grow your nest egg, at least a little.

Unless you have so much money that you don’t need to worry about inflation, you’ll need some growth investments. Usually, that means stocks and stock market mutual funds and ETFs.

How much of your portfolio to devote to growth? Again, there is no single approach. Travis Sollinger, director of financial planning at Fort Pitt Capital Group in Pittsburgh, tells US News’ Kira Brecht that he advises retirees to allocate 60% of their portfolio to stocks and 40% to bonds because “your years in retirement will still be significant.”

“If you have a well-diversified portfolio with a heavy equity exposure, you should see annual returns of 6%, 7% or more,” Sollinger says.

7. Plan for Required Minimum Distributions

After age 70 1/2 the Internal Revenue Services requires savers to begin taking minimum annual withdrawals from IRAs, 401(k)s and other non-taxable accounts into which you contributed funds before taxes. The IRS requires you to pay tax on the income.

(Note: The rules, penalties and taxes on withdrawals from Roth IRAs are different from regular IRAs and 401(k)s. Be sure to check the specifics of your Roth account.)

These minimum withdrawal amounts are calculated by the IRS based on life expectancy and account balances. The IRS rules are specific and inflexible about how much to withdraw and when. Ignore them, and you could face stiff IRS penalties. For example, if you were supposed to withdraw $4,000 and didn’t, you could owe a $2,000 penalty, writes the New York Times.

Here’s an IRS worksheet that shows when to make withdrawals and how much to withdraw.

8. Keep a Lid on Spending

Financial discipline is crucial if you are to outlive your money. Take an unsentimental look at your spending, decide how much to withdraw annually from savings and investments and stick to that plan through bad times and good.

9. Get Help Now & Then

When you manage your own money it’s a good idea to pay an expert for an independent review at least occasionally. Bengen, who came up with the 4 percent rule, tells The New York Times that even he uses financial advisers:

“Go to a qualified adviser and sit down and pay for that,” he said. “You are planning for a long period of time. If you make an error early in the process, you may not recover.”

Hire a Certified Financial Planner who works on a flat hourly rate to review your retirement plan, income and expenses. A CFP adviser must put your financial well-being ahead of their own.

Money Talks News founder Stacy Johnson discusses when and how to find a trustworthy financial adviser.

10. Rebalance Your Portfolio Yearly

You’ve decided what proportion of your investments to allocate to various types of investments but, over time, your investments perform differently, throwing off your original allocation. Once a year you’ll need to adjust, or “rebalance,” your portfolio to restore it to your original allocation choices.

11. Consider Other Sources of Income

Stocks and bonds are not your only investment choices in retirement. Two other possibilities are longevity insurance and annuities.

AARP financial writer Jean Chatzky says that longevity insurance starts payouts when you reach a specified age — 85, for example:

Say at age 60 you buy a $50,000 policy from MetLife. If you live to 85, you’ll start receiving annual payouts of $15,862 if you’re a man, $15,511 if you’re a woman.

No doubt you’ve heard of annuities, which are financial contracts sold by insurance companies. There are several annuity types, as explained in this piece by Stacy: Ask Stacy: Should I buy an Annuity for Retirement Income?

“As with all investments, the more a salesman is trying to jam something down your throat, the more cautious you should be,” Stacy says. If you are considering an annuity, get expert advice, and not from a salesperson but from an accredited financial adviser who charges a flat hourly fee. 

This post originally appeared on Money Talks News.

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