Strategies for a successful retirement

Initial public offerings are back on the calendar. Through this year, more than a hundred companies have filed and listed, a clear rebound in activity. Renaissance Capital counts 2025 IPOs in the triple digits, with a busy summer push that has investors paying attention.

If you are retired, the question is simple to ask and harder to answer. Should you buy IPOs at all, and if so, how should they fit your spending plan?

IPOs promise the thrill of getting in early. Some stocks “pop” on day one, and headlines follow. The SEC notes that underwriters sometimes support new issues in the first days of trading, which can keep prices from falling too far, but that support ends quickly. Prices can then move a lot, in both directions.

Many retail investors do not receive shares at the actual offering price. The SEC explains that most allocations go to institutions and high net worth clients. Most individuals buy in the open market after trading begins, at whatever price the market sets.

History shows a pattern. Average first-day returns have often been positive, reflecting underpricing, but longer holding periods tell a different story. Finance scholar Jay Ritter’s updated data shows that, on average, IPOs have lagged the broader market over three years in many periods. That means an early pop does not guarantee lasting gains for patient holders.

Add the lock-up factor. Insiders and early investors are usually restricted from selling for about 180 days. When lock-ups expire, a wave of shares can hit the market, which has sometimes pressured prices. The SEC highlights this timing risk, and it is disclosed in every prospectus.

As a retiree, you can control position size, entry method, and time horizon. You cannot control first-day pricing, institutional allocations, or when insiders can sell. Reading the S-1 and final prospectus matters, particularly the Risk Factors, Use of Proceeds, Dilution, and Shares Eligible for Future Sale sections, which the SEC calls out for investors.

Taxes also matter. Quick flips in taxable accounts create short-term gains, taxed at ordinary income rates. Holding more than one year moves gains to long-term treatment. The IRS lays out the rules and holding period basics.

Start with your withdrawal plan. If you need a given amount from your portfolio each year, adding highly volatile positions can increase sequence-of-returns risk. That is the risk of taking withdrawals after a drop, which can permanently dent your plan.

Use a mental “risk budget.” In many retirement plans, that budget is small. If you want exposure, consider limit orders rather than market orders, and a tiny position that will not derail spending if it goes south.

One practical approach

If you want a second set of eyes on whether IPOs fit your retirement plan, Money Pickle can help. Their network of vetted advisors focuses on retirement decisions, so you get clarity on risks, confidence in your drawdown plan, and help fitting any “fun money” ideas into a disciplined framework. Start the quick quiz here

Diversification beats hero bets. History suggests that betting on a handful of hot IPOs can disappoint over time, even if the first trade looks great. Ritter’s long-run return tables show why a basket often fares differently than a headline name. If you must scratch the itch, a broad, rules-based strategy can be easier to size and to rebalance than picking single winners.

Also, be realistic about information. The SEC reminds investors that emerging growth companies have scaled-down reporting in their early years, and that prospectus revisions during the roadshow can change key numbers. Build in extra margin for uncertainty, and read updates before you buy.

IPOs are not inherently bad, they are just a poor match for core retirement dollars. They can fit in a fun-money sleeve that is sized small and reviewed often. The market will serve up many new listings this year, but your plan does not need to chase every one. Renaissance Capital’s running total simply tells you the window is open again, not that you must walk through it.

What this means for you

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This newsletter is for educational purposes only and is not individualized investment, tax, or legal advice.

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Nothing in this newsletter is financial advice. Always do your own research and think for yourself.