RHYS MARTELL  |  financial advisor

How Conservative Should Your Investments Be In Retirement?

A lot of people are under the impression that when they get close to retirement, or when they are retired, that they need to get really conservative with their investments. That might be true for some people; if you genuinely are conservative then you do what you need to do. But if you are not genuinely conservative, then it may not be the right idea for you at all.

A lot of people think, or have been told, that you need to keep things conservative so that if there is a market downturn you won't lose all your money (or at least lose a a lot of it). The reality is that if you move everything into conservative assets you limit your ability to grow your money while you're in your retirement. We can have decades long retirements these days, even 20 or 30 years. For your money not to be growing, or even keeping up with inflation potentially, means you can burn through your retirement investments fairly quickly. If it fits your risk profile you still want to be able to have the potential for growth while you're in retirement.

One of the ways you can do that is often referred to as the "cash wedge strategy." What you do is take a certain amount of your assets and put them into either a low risk or no risk holdings on the side. You could do 2 or 3 years worth of your retirement income, so if you know you need $40,000 per year from your portfolio you could put $80,000 or $120,000 of your portfolio into the no risk holdings on the side. We know markets are cyclical so when, not "if", we go through an extended downturn you can pull from the cash portion in your low risk holdings, and not need to sell your investments at a loss. 2 or 3 years is usually long enough for a bear market to correct itself, and come back up. So, the key point here is that you don't need to be completely conservative with your whole portfolio when you retire; you just need to have a game plan.


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This article is for educational purposes only and is not intended to provide specific personalized advice including, without limitation, investment, financial, legal, accounting or tax advice. Opinions expressed are those of the owners and writers only. Every effort has been made to compile this material from reliable sources, however, no warranty can be made as to its accuracy or completeness. It may also include forward looking statements concerning anticipated results, circumstances, and expectations regarding future events. Forward-looking statements require assumptions to be made and are, therefore, subject to inherent risks and uncertainties. There is significant risk that predictions and other forward looking statements will not prove to be accurate. Please consult an appropriate professional regarding your particular circumstances. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus or the fund facts before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. Mutual Funds and Segregated Funds provided by the Fund Companies are offered through Worldsource Financial Management Inc., sponsoring mutual fund dealer. Other Products and Services are offered through Rhys Martell/Well-Built Plans Financial.

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