What should my portfolio look like?

 An Edward Jones financial advisor discusses strategy with an older couple in their home.

Whether you’re getting ready to retire or have already retired, the need for growth is gone, right? Wrong. You don’t just need investments to get you to retirement; you need them to get you through retirement.

Inflation risk

By not taking some market risk, there may be a greater chance you'll run out of money because of another major risk: inflation. An easy way to think about inflation (and the importance of growth investments) is through the increasing cost of your grocery bill.

 Infographic of historical inflation rates for 1982, 2012 and expected in 2027

Focus on what you can control

If you took a more balanced approach and invested roughly 50% in stocks and 50% in bonds/cash, we estimate the odds that this portfolio will last 25 years is about 90%.1

So what should you do? Remember that even though you can’t control the market, you can control your investment strategy decisions. We believe there are quite a few actions you can take.

Plan for a long life

For a 65-year-old couple, there's about a 60% chance that one spouse will live past age 90 and about a 30% chance one spouse will live past age 95.2 One of the best ways to ensure your money lasts as long as you need it is to plan on living longer than you think.

Maintain your balance

While growth is still important in retirement, short-term market declines – especially early on – can pose a serious risk to your retirement strategy. Having too much in stocks and growth investments can be just as risky as having too little. The key is achieving the right balance. Diversification does not guarantee a profit or protect against loss in declining markets.

Use cash appropriately

In addition to paying for everyday expenses, having cash on hand can help provide a source of “ready money” during market declines. We recommend having cash (excluding outside income sources) to cover at least a year’s worth of current expenses, plus three to five years’ worth of expenses in investments like short-term bonds or guaranteed investment certificates (GICs). That way, you aren’t selling long-term investments when they’re down in value. Instead, you are providing them opportunity to recover.

Don't reach for yield

It may be tempting to look for the investments offering the highest dividend or interest rate. But as the old saying goes, there's no free lunch – the higher the rate, often the higher the risk of the investment. Instead of chasing the highest-yielding investment, look for companies that have a track record of growing their dividend over time.

How we can help

The key is finding balance – not taking on too much investment risk while ensuring you have enough growth potential to reach your long-term goals. Your Edward Jones Financial Advisor can help you strike the right balance for you.

Important information:

1Assuming an initial 4% withdrawal rate and a 3% increase in withdrawals each year for inflation. An all cash portfolio is comprised of Cash/Short-term Investments (50% Cash/ 50%Short-term Fixed-income). A Balanced Growth & Income portfolio is comprised of (50% Stocks/45% Bonds/5% Cash).

2Milevsky, IFID: Society of Actuaries RP-2000 Table.