How to Go from Making Money to Making Money Happen in Retirement

Comedy writer Gene Perret said it well: “Retirement: it’s nice to get out of the rat race, but you have to learn to get along with less cheese.”

But it doesn’t necessarily have to be this way. We could think of this “less cheese” phase as making money happen rather than making money. The focus changes to turning your savings into investments and your investments into income streams.

It’s a concept that’s all too important, as nearly half of Americans leaving the workforce at age 65 are at risk of running out of money in retirement.¹ The landscape changes when you retire. For most retirees, your goal now is to conserve, grow, maintain and otherwise hold onto what you already have.

Now that you’re not drawing paychecks, making money happen is the way forward—it’s time for active retirement income planning rather than just trying not to spend your bank account. Let’s look at a few factors in the process.

What You Can Control

It’s always best to start a plan with what you can control rather than worrying about what you can’t. Your own awareness about how you handle money will take you a long way toward conserving it and helping it work for you.

Behavioral Bias

Behavioral bias helps us look at the psychology behind money—what’s the thought process behind spending or saving? Often in retirement, people fall victim to recency bias, in which they place too much importance on the most recent market behavior. This can blind them to potential changes or unpredictability in the future.

Envy might also be at work. If a friend is constantly bragging about how much he made in a particular investment scheme, you may be tempted to buy into it. But remember, your friend’s financial plan isn’t yours. You may be much better served by sticking to the goals and strategies you’ve worked on with your advisor for your unique journey.

Risk

Your risk profile should fit your goals. Your risk tolerance and your portfolio’s resilience are going to change over time according to your life stage and circumstances. Make sure the risk you take fits within your overall plan.

It can be more exciting to throw a dramatic “Hail Mary” pass rather than to run the ball. But if that deep pass attempt doesn’t fit into the situation, it could be unnecessary. without ignoring the entire playbook.

Diversification

The key element to help reduce downside risk is diversification. Going back to the football metaphor, if you constantly run the ball, you leave yourself at risk of your opponent knowing how to stop your team. The same is true for your investments. If you are too heavily weighted in one direction, you could face major market disruptions.

You can work with your advisor to carefully balance your portfolio and maintain a healthy level of diversification.

What You Can Prepare For

These are inevitable issues that you can’t evade with any amount of maneuvering. But you can prepare yourself for the future to make changes less shocking.

Medicare

Medicare’s trust fund is projected to be depleted by 2036², meaning the monthly premiums could go up substantially. And that could leave you with a smaller budget for the things you’re dreaming of doing. Current wealth-builders and young professionals could be facing an entirely different retirement landscape than we have now.

Social Security

Social Security has been questioned since it started. Just like the depletion of fossil fuel and the disappearance of the ice caps, the specter of Social Security’s bankruptcy is raised every few years. Somehow, cuts are made, taxes are tweaked, and retirement ages are raised—and the fund remains solvent.

But that doesn’t mean it won’t change. Benefits may not completely disappear, but they could be reduced. Or the retirement age could go up substantially, as it has in the past. Be prepared by being informed, and make sure your plan doesn’t lean too heavily on Social Security as it stands now.

Making Money Happen

Penny-pinching and using your senior discounts will only take you so far in your retirement years. Before long, that car repair, home repair, emergency surgery, or medication will take a chunk of your savings.

However, just because you’re done working doesn’t mean your money has to be. You can keep your money invested, giving it the opportunity to grow. Your advisor can help you position your portfolio for safety, and also for income.

If you’re looking for a side hustle beyond potential investment growth, real estate can be a fairly reliable choice if managed correctly. Whether you’re buying rental property or flipping a home, using real estate as an income source is a common way to spend your retirement years. It can take less time than a full-time job but still provides income to help you meet your goals.

Other side hustles can involve investing in businesses, starting a small business, working a part-time job, or consulting in your area of expertise. Think creatively about what you might enjoy for part-time work. Could you incorporate your interests into some level of employment? Maybe you work part-time at your favorite golf course to reduce green fees or your favorite craft store with a nice discount. Partial retirement can make the transition to full retirement easier mentally and financially!

Change Doesn’t Have to Be a Bad Thing

When the day finally comes that you pack your desk into a cardboard box and ride the elevator down that last time, just know that life changes in retirement. It’s how you adapt to that change that makes the difference.

You’ll find out quickly that retirement isn’t just about what you’ve had rolling around in your 401(k) or your nest egg but how you plan for income during those years. It’s how you make money happen for the long-term.

Have a conversation with an advisor who can help you pursue your definition of true wealth—whether that’s time spent with family, a vacation on the beach, or a new fishing boat. Whatever your definition of true wealth, we’re here to help you pursue it.

1 “About 45% of Americans will run out of money in retirement, including those who invested and diversified. Here are the 4 biggest mistakes being made.” Yahoo!Finance, 25 Sept. 2024, https://finance.yahoo.com/news/45-americans-run-money-retirement-004931245.html

2 “Social Security and Medicare Continue on path to Insolvency, Trustees Confirm.” Budget Committee, 06 May 2024, https://budget.house.gov/press-release/social-security-and-medicare-continue-on-path-to-insolvency-trustees-confirm

Michael Gruidel is a non-producing registered rep of Cetera Advisor Networks LLC. Cetera Advisor Networks LLC is under separate ownership from any other named entity.

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