Retirement…it’s an adventure, not a destination. Most of us set a goal while we’re working to save for an early and prosperous retirement. We budget during our working years and invest wisely to reach our retirement goals. But once retired, your investment strategy doesn’t stop; it’s simply refocused on maintaining your lifestyle and achieving all of your retirement dreams. Retirement isn’t the end game—it’s a phase of life that can span more than 30 years.

As each generation lives longer, retirement lasts longer. And even though the average retirement age is increasing, our longevity is outpacing our additional working years. For many, those years in retirement are healthier than they were for our parents and grandparents. As you set your goals, consider how many years you plan to spend in retirement based on your expected lifespan and how you wish to live. We used to say that most retirees would spend 15% less in retirement than while working; however, if your retirement includes additional travel or other hobbies that you weren’t enjoying while working, spending can be the same, or even greater.

The most important decision for retirees

A key consideration for both saving for retirement and investing during retirement is your asset allocation. The day you retire doesn’t usually entail a dramatic shift in asset allocation. You might expect to shift most assets to bonds for income and stability. However, in a low-yield environment, it’s especially important to have stocks in your portfolio to provide long-term growth. This is particularly true if you expect to have a 20–30 year retirement.

Rather than only drawing income from your portfolio to support your retirement spending, a total return approach (using both income and capital appreciation) gives you a better chance of meeting your goals. Research shows that if you have a balanced portfolio, you can expect to draw 3–4% from your portfolio each year and still maintain your spending power over your lifetime. If you have to spend more than 4%, you could choose a portfolio with a more aggressive asset allocation to provide the growth you need. Maintaining an adequate cash reserve for short-term needs can alleviate concern over portfolio balance fluctuations.

Keep an eye on your tax bill

It’s also important to consider which accounts you spend from first, and how those accounts are invested. Investing tax efficiently, both before retirement and after, can allow you to keep more of your earnings. Owning taxable bonds in your tax-deferred accounts, and stocks in your taxable accounts, can result in higher after-tax returns over time. Usually investors will benefit from a spending strategy that preserves tax-advantaged accounts longer. You may spend from your taxable dollars first, given that the tax liability may be less, then from your tax-deferred accounts, and lastly from your tax-free (Roth IRA) assets. However, if you’re required to take distributions from your IRA, or are in a relatively low tax bracket and expect to be in a higher tax bracket in the future, you may benefit from spending some dollars from your tax-deferred accounts earlier. Your financial advisor can assist you in determining the most appropriate method of spending for your situation, which may change from year to year.

While saving for retirement is a long-term goal, investing during your retirement can also be a long-term endeavor. Planning for retirement, and living in retirement, are organically linked. The day of your retirement is certainly a celebration of many achievements, but it doesn’t require any fanfare for your portfolio. Your investment strategy during those golden years may be quite similar to how you’ve always invested: balanced, well-diversified, tax-efficient, and low-cost.