Retirement Asset Allocation

Your asset allocation strategy in retirement will probably be different than the one you used when saving for retirement. During your accumulation years, your asset allocation decisions may have been focused primarily on long-term growth. But as you transition into retirement, your priorities for and demands on your portfolio are likely to be different. For example, when you were saving, as long as your overall portfolio was earning an acceptable average annual return, you may have been happy. However, now that you're planning to rely on your savings to produce a regular income, the consistency of year-to-year returns and your portfolio's volatility may assume much greater importance.

The goal of asset allocation

Balancing the need for both immediate income and long-term returns can be a challenge. Invest too conservatively, and your portfolio may not be able to grow enough to maintain your standard of living. Invest too aggressively, and you could find yourself having to withdraw money or sell securities at an inopportune time, jeopardizing future income and undercutting your long-term retirement income plan. Without proper planning, a market loss that occurs in the early years of your retirement could be devastating to your overall plan. Asset allocation and diversification do not guarantee a profit or ensure against a loss, but they can help you manage the level and types of risk you take with your investments based on your specific needs.

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