Getting to retirement is only half the goal. That’s why having a cash cushion, minimizing taxes and more are so important to having a successful retirement.

Investing during retirement isn’t the same as when you’re working. In retirement, the time horizon is different: Without a paycheck, you may need to sell an investment to create cash.

In retirement, there are also new things to account for, like Social Security, required minimum distributions, Medicare premiums and maybe even long-term care costs.

Our investment behaviors can change, too — without a steady paycheck, we may develop greater loss aversion, or fear of losing money in the investment markets. Yet some things don’t change, like taxes, inflation, and recessions. It’s a lot, to say the least.

To account for all this, retirees can approach investing differently than when they were working. The following are four things to focus on in retirement, adapted from our upcoming webinar (info below).

1. Building a comfy cash position

I find my retired clients sleep better at night when they have cash on the sidelines. When the stock and bond markets crater, like they did in 2022, cash on hand is a welcome relief. Generally speaking, cash can be short-term T-bills, high-yield savings accounts or money market accounts. Each are readily liquid and conservative, but there are subtle differences. I usually recommend one or two years of living expenses in readily liquid cashlike investments for retired clients. (Read more about options in my article After the Recent Banking Crisis, What Can You Bank On?)

I also suggest retired clients keep open a home equity line of credit or a securities line of credit. This comes in handy in a pinch for large, unexpected expenses. Lines of credit also serve as another lifeline if you can’t keep one or two years of cash on hand. The key is to keep them open, but don’t use them like a piggy bank — use them for emergency purposes.

2. Minimizing taxes

Taxes in retirement are an important consideration and can eat away at a retiree’s budget. Withdrawals from a 401(k) are taxed as ordinary income. Social Security may be taxable. Dividends and interest may be taxable. Not to mention there may be property taxes, sales taxes and other taxes that may be invented down the road. It’s a taxing problem.

But careful planning can help. There are many solutions, such as implementing an aggressive tax-loss harvesting strategy with non-retirement money, or being smart about how to give to charity, or slowly converting IRAs and 401(k)s to Roth. Each idea on their own has impact, but a financial planner can help you find the optimal mix and the optimal investment to use.

3. Getting asset allocation right (the most important decision)

The mix of stocks, bonds, real estate, commodities and other investments in your portfolio is known as asset allocation. That mix, along with the underlying investment, is responsible for the return in your portfolio. No one asset class is the clear winner every year. Cash was the winner last year, but not every year.

The proper mix of investments depends on a variety of factors, like how much risk you can stomach and how much risk you should stomach. A retiree who is afraid of losing money has a different asset allocation than someone who has enough guaranteed money, like a pension and Social Security, to not need the money in the foreseeable future.

My advice: Spend time on your asset allocation decision — it will affect the performance or underperformance of your portfolio.

4. Being aware of investment biases

Emotions, biases and our past experiences have a lot to do with investing. One bias retirees may experience is loss aversion, the feeling of winning is not as strong as that of losing. In other words, you may feel your losses more than your gains. Loss aversion can cause an investor to ditch a stock early on if it underperforms or miss out on stock market gains.

The key is to be aware of these heightened emotions but not let them control your decision making. If I know, for instance, that a retiree has a high degree of loss aversion, then that retiree has a different asset allocation than an investor who is not concerned about fluctuations in their investment account.

A retiree concerned about losses should have more in cash, guaranteed investments or guaranteed sources of income. There are all sorts of investment biases, and we may not even realize we have them. In other words, we may be our own worst enemy. Having an investment adviser can help bring those biases to light.

Final thoughts

Getting to retirement is a monumental task in itself. Many things have to go right — your health, your family’s health, your career, your ability to save, the market, the economy and so on. And while getting to retirement is an accomplishment, you are only halfway there. It’s like climbing a mountain, and now we must find the best route back down.

While these four tips are a helpful start — building a comfy cash position, minimizing taxes, getting your asset allocation right and being aware of possible investment biases — nothing, in my opinion, beats having a comprehensive financial plan that you update annually. That, to me, is an indispensable guide up and down the mountain.