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4 Keys to Shape Up Your Portfolio for Retirement

"Save Your Wealth - Save Your Health" Michele Nami-von Hoven

Is it time to take stock of your portfolio, your 401K, 403b, 457 plan or IRA's?

Have they been on auto pilot? What assets do you have to pay for your retirement expenses? These are just a few questions to consider for a check-up. The following will help you consider some key points when managing your portfolio for retirement:

Do you know if your portfolio is overweight or underweight?

Key 1 - Take stock of your situation.

What are your dreams for retirement?

How will variations in your portfolio affect returns when it's time to turn your Accumulation portfolio into a

De-cumulation portfolio and provide your paycheck in retirement? The De-cumulation phase of your portfolio is different from the accumulation phase as you will go from savings mode to withdrawal mode. And with longevity into your 90's or 100, you will have to stretch your portfolio, that is if you want to maintain your lifestyle.

Key 2 - Assess Your Risk Tolerance.

How much could your portfolio drop before you start getting nervous? How much risk can you tolerate? If you are within 5 - 10 years of retirement a drop could cause a significant decrease in your retirement income. This is Sequence of Returns Risk. A good example is what happened in 2008 when the S & P 500 dropped 37%.

Let's say you were retiring just after the market drop and you had $1,000,000 (You can adjust the 0's) in your retirement account in 2008 and were anticipating drawing 4%, that would be $40,000. After the decline of 37%, your $1,000,000 would be worth $630,000. Now, after the decline you would draw 4% on $630,000, that would be $29,200 instead of the $40,000. That's a difference of $10,800 in retirement income. You would have to take additional principal to make up for the loss or simply reduce your standard of living.

You can see why a check- up is so important to your financial health and well-being. You do not want to get caught up in Sequence of Returns risk, if you do, you may have to adjust your lifestyle and not in a good way. (I am not advocating a 4% withdrawal rate. Everyone's financial DNA is unique as your physical DNA and should be analyzed for your specific situation.)

Key 3 - Shape Up Your Asset Allocation.

Do you have a specific asset allocation written down? Perhaps you may be wondering if you are missing out on returns, or you might be taking too much risk or not enough risk. When I say not enough, I often see portfolios with 100% in money market funds which can actually cause you to lose money if the fees are higher than the returns.

Key 4 - When was the last time you rebalanced your portfolio?

Does you portfolio mirror the asset allocation that you designed based on your Investment Policy Statement? The mix of Large Cap Growth/Value vs Small/Mid Cap Growth/Value vs Bonds may be imbalanced due to larger or smaller returns. Do you have several mutual funds that have similar holdings? Or does it need to be redesigned due to changes in your life cycle? Do you have an Investment Policy Statement (IPS), which clearly defines your investment style? If you do not, then you should get one.

Taking a pro-active approach to your portfolio will be beneficial in designing your retirement and supplementing your lifestyle. It's often in good times people think "let it ride." Just remember, Las Vegas was built on people who "let it ride."

If you would like to strategize your specific situation, let's set up a conversation. As a

RICP, Retirement Income Certified Professional and Fiduciary, I welcome the opportunity! When would you want to know your options, when you have some or when you don't? Thank you for reading and all the Best of Health, Wealth & Success.


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