A question that comes up often is whether or not it’s wise to become more conservative as you approach or are in retirement.
I respond by asking three questions focused on risk tolerance –
- What are you comfortable with?
- How reliant on the portfolio will you be?
- When will you be reliant on the portfolio?
Regarding the 3rd question, for most people who are planning on a 20 to 30 year retirement, the answer is usually 20+ years for at least a portion of their investments, since the goal is to not run out of money! If that is the case, you may want to consider at least having a portion of your portfolio positioned for growth considering that returns on stocks have been anywhere from down 39% to up 47% over one year, but over a 20-year period have ranged from +6% to +17%* (JPMorgan Chase & Co, 2019). However, everyone’s individual tolerance for risk should be considered before investing.
*Stocks represent the S&P 500 Shiller Composite and is for period from 1950 to 2010.
Alex Voorhees and Reston Wealth Management do not provide legal, accounting or tax advice. This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified investment, tax or legal advisor. The opinions voiced in this article are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) or strategies may be appropriate for you, consult your financial advisor prior to investing. No strategy assures success or protects against loss. You should consider the investment objectives, risks, charges and expenses of any investment carefully before investing.
JPMorgan Chase & Co. (2019). Guide to the Markets.