One of the first questions people ask about investing is, “How have you done?” Or maybe, “Am I making enough?” Or, “How does my portfolio compare?”
Those are reasonable questions, but as you approach retirement, we believe there’s a more important one: Are your investments aligned with your retirement plan?
During your working years, the primary job may have been simple: save as much as you can and grow your money. Retirement changes that. Your investments may now need to provide monthly income, fund larger purchases, withstand difficult markets, and keep growing for 30 years or more.
That’s why Align Your Investments is the second phase of our Guided Retirement Roadmap.
Assign a Name and Goal to Every Dollar
Once we’ve mapped your retirement income and spending needs, we have a much better idea of what your investments actually need to do.
Instead of one generic portfolio, we think in terms of buckets of money with different jobs.
One is a growth bucket — money designed for the long term, helping your retirement income keep pace with the rising cost of living.
But not every dollar has decades to grow. If you know you’ll need money next year for a new vehicle, a home project, or simply monthly income, that dollar has a very different job.
Finding the Right Balance
We don’t want a retirement portfolio to be too aggressive or too conservative.
If money you need in six months is invested entirely for long-term growth, you could be forced to sell during a downturn. But moving everything into conservative investments creates a different risk: your money may not grow enough to support rising costs over a long retirement.
For many retirees, we like to start with a minimum of two years of needed portfolio withdrawals in a safe or income bucket, sometimes called a war chest. That gives you a source of funds for near-term spending without exposing every dollar to the same level of market risk.
Don’t Turn a Temporary Decline Into a Permanent Loss
Markets decline. That’s normal. The problem often isn’t that an investment goes down temporarily. It’s when you’re forced to sell while it’s down, either because of fear or simply because you need the money.
A properly funded war chest can help with that. If your near-term income needs are accounted for, you may have more freedom to give growth investments time to recover.
Your Sleep-at-Night Factor Matters
Two years is a starting point, not a rigid formula. Some people feel fine with that. Others may sleep much better with five or six years. If the overall plan supports it, that’s not necessarily wrong.
Our job is not simply to build a portfolio that works on paper. It’s to help create one you can actually live with through both good markets and bad.
That’s what it means to align your investments: not chasing the highest return, not avoiding risk at all costs, but giving your money clear jobs and finding the right balance to support your retirement journey.
Disclaimer
This content is developed from sources believed to be providing accurate information. The information provided is not written or intended as tax advice. You should consult with your tax advisor for guidance on your specific situation.
