Retirement Portfolio Planning: Does Your Portfolio Fit Your Lifestyle?
Most retirement portfolios are built around three core inputs: your investment objective, risk tolerance, and time horizon. Using these factors along with sophisticated portfolio-optimization strategies, investors can feel confident they own a well-diversified investment portfolio, appropriately positioned to pursue long-term goals.¹
But effective retirement portfolio planning doesn’t stop there. How you choose to live in retirement is an additional factor worth considering when shaping your retirement investment portfolio.
Below are a few lifestyle scenarios that may call for adjustments to your retirement portfolio management approach.
Starting a Business in Retirement?
Using retirement funds to launch a business carries significant risk. If this is part of your plan, consider the following adjustments to your retirement investment planning:
- Reduce portfolio risk — Lowering the risk level of your investment portfolio can help offset the added risk of a new business venture.
- Prioritize income generation — Since a new business is unlikely to generate income right away, structuring your portfolio with an income orientation can help provide current income until the business becomes profitable.
Planning Extended Travel in Retirement?
There are several good reasons to consider a professional money manager for your retirement savings — and extended travel is one worth adding to the list.
If your retirement plans include long stretches of travel that may keep you disconnected from day-to-day market activity (even with modern communication tools), managing a portfolio of individual securities that requires constant attention may not be the ideal strategy.²
For this type of lifestyle, professional portfolio management may be a better fit, allowing you to travel with confidence while your investment strategy is monitored on your behalf.
Rethinking Your Retirement Income Strategy
Market volatility can undermine even a well-built retirement-income strategy. Drawing down savings while your portfolio’s value is falling is one of the leading causes of failed income approaches.
While it may involve some trade-offs in potential opportunity cost, certain products and strategies are designed to help protect your income stream from this risk — an important consideration for anyone managing investments in retirement.
Working With a Financial Planner
Because every retiree’s lifestyle and goals are different, there’s no one-size-fits-all investment strategy for retirees. Whether you’re planning a new business, extended travel, or simply want a more resilient income strategy, working with a financial planning professional — including firms serving retirees throughout Florida — can help ensure your retirement portfolio truly reflects how you plan to live.
Frequently Asked Questions
What is retirement portfolio planning?
Retirement portfolio planning is the process of building an investment portfolio based on your investment objective, risk tolerance, and time horizon — while also factoring in how you plan to live during retirement, such as starting a business or traveling extensively.
How does starting a business affect retirement portfolio management?
Starting a business with retirement funds adds risk to your overall financial picture. Many retirees choose to reduce the risk level of their investment portfolio and shift toward an income-oriented approach to help cover expenses until the business becomes profitable.
Should retirees use a professional money manager?
Professional management can be especially useful for retirees who travel for extended periods and may be disconnected from day-to-day market activity. Rather than actively managing individual securities, professional oversight allows your portfolio to be monitored while you focus on your retirement lifestyle.
How can retirees protect their income from market volatility?
Market volatility is one of the leading causes of failed retirement-income strategies, particularly when savings are drawn down as portfolio values decline. Certain products and strategies are designed to help reduce this risk, though they may involve some opportunity cost.
Does diversification eliminate investment risk in retirement?
No. Diversification and portfolio-optimization strategies help manage investment risk, but they do not eliminate the risk of loss if security prices decline.¹
- Diversification and portfolio optimization calculations are approaches to help manage investment risk. They do not eliminate the risk of loss if security prices decline.
- Keep in mind that the return and principal value of security prices will fluctuate as market conditions change. Securities, when sold, may be worth more or less than their original cost. Past performance does not guarantee future results. Individuals cannot invest directly in an index.
The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult a legal or tax professional for specific information regarding your individual situation. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security.
