This week’s theme on the Retirement Quick Tips Podcast is: 10 Things You Must Do Before Retirement - Part 2

Today, I’m talking about re-allocating your portfolio to match your risk tolerance and income needs. 

One of the main problems I see with someone’s investment portfolio as they approach retirement is that it doesn’t match up with their age and stage in life. Sometimes it’s too conservatively invested, hampering growth, but most of the time the portfolio is invested far too aggressively, sometimes with 80% in stocks or more. This can be disastrous if not fixed in the years leading up to retirement. 

With losses in many portfolios exceeding 15-20% in 2022, this should be instructive & motivating in helping you to re-allocate your portfolio prior to retirement. 

Step 1 - getting to the right allocation before retirement. What is the right allocation? The right balance varies based on a number of factors, but for someone approaching retirement, it should be around 50-65% in stocks for most people.  (age-weighted AA cheat sheet)

Step 2 - focusing the portfolio on income - dividend paying and growing stocks and bonds that generate income. Thankfully with interest rates heading higher, bonds investments that actually pay decent income are easier to find. 

It’s very important that your portfolio is re-allocated before retirement so you don’t suffer big losses in the couple years before and the couple years after retirement. This could force you to work longer, if a quarter of your nest egg is wiped out in a significant down market, and the more in stocks you have, the worse the drop will be and the longer it will take for your portfolio to recover, potentially forcing you to push back your retirement date, just to make up for the bad timing of wanting to retire when a bad bear market hits your portfolio. 

That’s it for today. Thanks for listening! My name is Ashley Micciche and this is the Retirement Quick Tips podcast.   

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Tags: retirement, investing, money, finance, financial planning, retirement planning, saving money, personal finance