As retirees embark on their post-career life, a crucial decision is how to allocate their investment portfolio. Many set their allocation initially and never revisit it, risking long-term financial security. Through Eduardo and Anna’s story, we’ll explore why continuous portfolio adjustments are essential for a secure retirement.
Eduardo, 65, and Anna, 64, planned to retire in 2022. A heavy investment in tech stocks caused a 25% portfolio loss, delaying their retirement. By the end of 2023, after a market rebound, they sought professional guidance.
They had substantial savings: Eduardo’s 401(k) had $825,000, Anna’s IRA over $1 million, and their joint investment account was $616,000. With a paid-off home valued at $1.1 million, they were in a strong position. Their monthly expenses were $6,600, excluding healthcare and occasional large purchases like a new vehicle every five years.
Eduardo and Anna planned for healthcare costs, new vehicles, and inflation. Eduardo would claim Social Security at 70 to maximize benefits, and Anna had a $600 monthly pension and also planned to claim Social Security at 70. This strategy aimed to maximize their secure income and reduce reliance on their investment portfolio during market fluctuations.
Their total portfolio was $2.45 million, with $615,000 in their primary withdrawal account. We allocated $490,000 in conservative investments to cover five years of expenses, considering dividends and interest income. Balancing risk and growth, 70% of their primary account went into bonds and 30% into stocks, ensuring stability and allowing for growth.
As they aged and Social Security kicked in, their income sources diversified, reducing reliance on investments. For example, by age 70, their portfolio could grow to around $3 million, assuming a 6% return rate. Regular reviews and adjustments kept their portfolio aligned with their financial plan, providing stability and peace of mind.
Eduardo and Anna’s story highlights the importance of a dynamic investment strategy in retirement. Continuous portfolio management transforms retirement from financial uncertainty to stability and enjoyment, allowing retirees to focus on what truly matters – time with loved ones and pursuing their passions.
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⏱Timestamps:⏱ 0:00 - Meet Eduardo and Anna 2:10 - Retirement goals 3:40 - Retirement income 5:42 - Expenses in retirement 8:11 - Protecting against a downturn 13:33 - Risk capacity 15:32 - Annual adjustments 20:30 - The end result
