Retirement Planning, Financial Planning

Retiring Soon? It’s Time to Adjust Your Portfolio Allocation

May 06, 2024

By Peter J. Secrist, Senior Vice President, Managing Director and Principal Portfolio Manager and Thomas Beirne III, CFP®, Vice President, Senior Wealth Planning Officer and Business Development Manager

Adjusting your portfolio allocation as you head into retirement is critical in securing your financial future, but it’s easy to get tripped up by common myths and misconceptions. While it might seem prudent to play it safe and adopt a conservative approach from day one, being overly cautious can actually pose risks to your financial security in the long run. A well-diversified portfolio can provide the financial flexibility to achieve your goals while maintaining long-term security.

Here are five things you need to consider when speaking to your wealth advisor about adjusting your portfolio allocation as you head into retirement:

  1. Length of Retirement. With advancements in healthcare and lifestyle, people are living longer than ever before, so your retirement could potentially span decades. It's crucial that your assets can last as long as you do. Being overly conservative with your investments might provide stability in the short term, but it could mean missing out on growth opportunities that could sustain you throughout your retirement years. The transition from growth to income should be a gradual process that focuses on increasing diversification to help reduce large swings in the value of your investments.
  2. Potential Income Streams. Retirement doesn't necessarily mean the end of earning. Understanding potential income streams—such as Social Security, pensions, annuities, or part-time work—is necessary for determining how much risk you can afford to take with your investments. By structuring your portfolio to complement these income sources, you can create a more sustainable retirement income plan.
  3. Inflation. Inflation is the silent thief of purchasing power. Even low inflation rates can significantly erode the value of your savings over time. While conservative investments like bonds and cash offer stability, they may not keep pace with inflation. By incorporating assets like equities, real estate and/or other alternative assets into your portfolio, you can hedge against inflation and preserve your standard of living in retirement.
  4. Covering the basics. Ultimately, retirement is a balance between financial security and living the life you've always dreamed of. The first step is understanding your spending rate on basics (such as food, clothing, shelter, insurance, and health care) and budgeting to make sure those are covered. That includes a treasure chest of very conservative investments (cash and cash equivalents) you can dip into to weather any unexpected storms in case of a market downturn.
  5. Taxes. Don’t forget about taxes! As you transition into retirement, strategic tax planning can help minimize unnecessary tax liabilities and optimize your overall financial strategy for retirement, making sure your investments last as long as you need them to. Withdrawals from certain retirement accounts, like traditional IRAs or 401(k)s, are taxable. These accounts also have required minimum distributions.

Preparing for Retirement: Questions to Ask Yourself and Your Wealth Advisor

  1. What age do I plan to retire?
  2. Do I plan to continue working part-time?
  3. What are my retirement goals? Am I looking to spend my assets in retirement or grow them for my children/grandchildren?
  4. Are my retirement goals achievable?
  5. What are my philanthropic goals and how do I meet them?
  6. What is my safety net? How much should it be and in what investments?
  7. When should I begin taking Social Security, and how will that affect my overall retirement strategy?

Approaching retirement? Contact your Washington Trust Wealth Management advisor today to discuss how to adjust your portfolio to meet your goals for retirement and life.

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This document is intended as a broad overview of some of the services provided to certain types of Washington Trust Wealth Management clients. This material is presented solely for informational purposes, and nothing herein constitutes investment, legal, accounting, actuarial or tax advice. It does not take into account any investor's particular investment objectives, strategies, tax status or investment horizon. Please consult with a financial counselor, an attorney or tax professional regarding your specific financial, legal or tax situation. No recommendation or advice is being given in this presentation as to whether any investment or fund is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors, or markets identified and described were, or will be, profitable.

Any views or opinions expressed are those of Washington Trust Wealth Management and are subject to change based on product changes, market, and other conditions. All information is current as of the date of this material and is subject to change without notice. This document, and the information contained herein, is not, and does not constitute, a public or retail offer to buy, sell, or hold a security or a public or retail solicitation of an offer to buy, sell, or hold, any fund, units or shares of any fund, security or other instrument, or to participate in any investment strategy, or an offer to render any wealth management services. Past Performance is No Guarantee of Future Results.

It is important to remember that investing entails risk. Stock markets and investments in individual stocks are volatile and can decline significantly in response to issuer, market, economic, political, regulatory, geopolitical, and other conditions. Investments in foreign markets through issuers or currencies can involve greater risk and volatility than U.S. investments because of adverse market, economic, political, regulatory, geopolitical, or other conditions. Emerging markets can have less market structure, depth, and regulatory oversight and greater political, social, and economic instability than developed markets. Fixed Income investments, including floating rate bonds, involve risks such as interest rate risk, credit risk and market risk, including the possible loss of principal. Interest rate risk is the risk that interest rates will rise, causing bond prices to fall. The value of a portfolio will fluctuate based on market conditions and the value of the underlying securities. Diversification does not assure or guarantee better performance and cannot eliminate the risk of investment loss. Investors should contact a tax advisor regarding the suitability of tax-exempt investments in their portfolio.