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As you near retirement, your investment mindset shifts. For years, you’ve focused on growing your nest egg—maxing out contributions, riding market ups and downs, and working towards this moment. But now, as you near retirement, the priority begins to change. Instead of simply focusing on, "How much can I grow my investments?" you begin to ask yourself, "How do I make sure this money lasts?"
Here’s how that transition happens and what it means for your investment strategy.
The Glide Path Approach to Retirement Investing
When you’re young, your portfolio is typically aggressive, aiming for maximum growth. As you get closer to retirement, we gradually rein it in to reduce risk. This shift is often referred to as the “glide path” method.
- The Final five to ten years before retirement – We work to gradually shift from a growth strategy to an all-weather portfolio designed to carry you through retirement.
- One to two years before retirement – We revisit your plan and put the finishing touches on your retirement portfolio, with a focus on decreasing volatility.
- Once retired – Your retirement portfolio is already prepared and we continue to monitor and manage it, making minor adjustments along the way for various items, including your income needs.
Transitioning from Accumulation to Decumulation
Once clients retire, their financial strategy shifts from accumulating wealth - building the nest egg - to actually using it. This transition requires a careful approach to income planning.
- If a client retires before Social Security or pension benefits begin, we determine which accounts to withdraw from to bridge the gap.
- Once those benefits start, the withdrawal strategy may change to balance income sources efficiently.
Structuring Income for Retirement
Many clients want regular, predictable income. We tailor distributions based on their preferences:
- Some prefer a lump sum once or twice a year.
- Others want a steady monthly deposit into their checking account for easier budgeting.
- To protect stability, we set aside six to twelve months' worth of living expenses in cash to avoid any market fluctuations and so that clients can immediately access funds if and when needed.
- If unexpected expenses arise, we review their accounts and determine the best source for additional funds.
Maintaining a Balanced Portfolio in Retirement
The key to a successful retirement portfolio is balance. We aim for a mix of stocks and bonds that provides stability and fair returns without unnecessary risk.
- We avoid being overly aggressive, especially if a client can’t afford to take on high levels of risk.
- The portfolio is monitored and adjusted as needed to ensure it remains aligned with the client’s financial goals and market conditions.
Tying it Up
Transitioning into retirement requires thoughtfully adjusting portfolios over time, structuring income efficiently, and maintaining a balanced investment strategy. We help clients navigate this major life shift with confidence. If you need guidance on structuring your portfolio for the next phase, we’re here to help.