As you approach retirement, the entire purpose of your portfolio will begin to change. It no longer has to get you to retirement; it has to get you through retirement.
When this happens, Edward Jones believes a more balanced mix between equities and fixed income is appropriate. You still need growth because inflation doesn’t retire – but you also need investments designed to help provide for your current income needs and provide more stability.
Each investment within your portfolio can serve a valuable role, not just from a diversification standpoint, but also for providing for your income needs in retirement. Interestingly, as your needs change as you enter retirement, that role – and the type of investments you own – may change as well.
We recommend the following sequence as a general guide:
This sequence is just a guide – the accounts and investments you use may vary from year to year, depending on your investment and tax considerations. You’ll want to talk with your financial advisor and tax professional before making any decisions.
During down markets, your emotions may be telling you to make changes and potentially sell stocks. But keep in mind that stocks are there to provide for your long-term income. Your near-term income needs are already addressed by your cash and short-term fixed-income ladder, so you can spend from them, allowing your stocks the time to potentially recover from these declines.
When markets are up, you could cover some of your current expenses through the growth of your portfolio, as you may end up being overweight in stocks. You could also use this growth to “restock” your cash and short-term ladder. Rebuilding your ladder can help you prepare for those inevitable down years, whenever they may occur.
1 You must evaluate whether a bond or CD ladder and the securities held within it are consistent with your investment objectives, risk tolerance and financial circumstances.
2 Dividends can be increased, decreased or eliminated at any time without notice.
This information is for educational and illustrative purposes only and should not be interpreted as specific investment advice. Investors should make investment decisions based on their unique investment objectives and financial situation.
Investors should understand the risks involved of owning investments, including interest rate risk, credit risk and market risk. The value of investments fluctuates, and investors can lose some or all of their principal.