The transition from working years to retirement brings many changes, most of them very good. One thing that may need to change is the composition of the investment mix in your financial accounts. If you have questions, seek out an investment advisor Odessa TX.
The Three Pillars Of Investing in Retirement
Before we consider the construction of a post-career portfolio, it is prudent to think about what we want from this portfolio. In most cases, three main concerns are important to the recent retiree:
- Protection of the hard-earned portfolio,
- Generation of income from these assets, and
- Questions about how much growth may still be needed.
Additional thoughts revolve around whether the assets are to be passed on to heirs or not, and consideration of other sources of income during the retirement years.
Comparison of Pre-Retirement to Post Retirement Portfolios
The classic way to look at a securities-based portfolio is to divide it up into three components: Stocks, Bonds, and Cash. Stocks are used for growth, although with growth potential comes the risk of loss. Bonds are used for balancing stocks and provide a steady income. Cash is used for safety and to keep as “dry powder” should markets drop.
Typically, young workers are advised to place a large percentage of their investments in stocks or stock mutual funds. The thinking here is that younger folks want to maximize growth and are willing to assume the risks of stock investing because they have decades of time to absorb any losses along the way.
This all changes once you retire. Then, many prudent investors scale back on their stock allocation and begin a tilt toward more safety. Upon retirement, income should take a prominent role. If you have a company pension, this may provide much of your income. If not, your retirement savings plus social security will have to provide the income you need for your lifestyle.