Is Your Investment Portfolio Still Aligned With Your Retirement?

As summer begins to wind down, many people use the change of season to revisit unfinished projects and prepare for the months ahead. Your investment portfolio may deserve a place on that list.

Whether you are approaching retirement or already enjoying it, your investment strategy should not remain on autopilot. Markets change. Your priorities evolve. Your income needs may shift. And a portfolio that made sense several years ago may not be the right portfolio for the next stage of your retirement journey.

At Wood Financial Group, we believe a successful retirement strategy should address five critical areas: Risk Management, Optimizing Income, Unplanned Healthcare Costs, Taxes, and Estate Planning. Together, these areas form what we call The Retirement ROUTE.

Your investment portfolio plays an important role in that journey, but it should never be considered in isolation. A portfolio review should help determine whether your investments are still working in coordination with your complete retirement strategy.

Are You Entering or Already in the Retirement Red Zone?

The years immediately before and after retirement can be some of the most financially important years of your life. We call this period the Retirement Red Zone.

While you are working, you may have time to wait for markets to recover from a downturn. You are also generally adding money to your retirement accounts rather than withdrawing it. As retirement approaches, that equation begins to change.

In The Retirement ROUTE, we share the story of Brian, whose retirement plans were disrupted when the COVID-19 market downturn arrived just as he was preparing to retire. His experience demonstrates an important reality: your retirement date and the market’s timeline do not always cooperate.

A significant loss shortly before retirement can delay your plans. A loss shortly after retirement can be equally challenging because you may need to sell investments while their values are down to fund your living expenses.

For pre-retirees, the question is whether the portfolio is prepared for the transition from saving to withdrawing. For retirees, the question is whether market volatility could disrupt the income and lifestyle the portfolio is intended to support.

Has Your Portfolio Drifted From Its Intended Mix?

Even when you have not intentionally changed anything, your portfolio can change beneath the surface.

Suppose your investments were originally divided among stocks, bonds, cash, and other assets according to a particular strategy. As different investments rise and fall in value, those proportions can shift. This is known as portfolio drift.

After a period of strong market growth, stocks may represent a larger portion of your portfolio than intended. That could mean you are taking more risk today than when your original strategy was created.

The opposite can also happen. A portfolio that becomes too conservative may not provide the growth potential needed to keep pace with inflation and help support a retirement that could last 20 or 30 years, or longer.

Reviewing your current allocation can help you determine whether it still reflects your retirement timeline, income needs, and comfort with market fluctuations.

Are You Taking the Right Amount of Risk?

Risk is personal, especially as retirement draws closer.

It is important to distinguish between how much market risk you are emotionally comfortable accepting and how much risk your retirement plan can financially withstand. You may feel comfortable watching the market rise and fall, but a major decline can have a different impact when you are preparing to retire or regularly withdrawing money.

That does not mean avoiding investment risk altogether. Many retirees still need opportunities for long-term growth. The goal is to find an appropriate balance among growth, income, stability, and access to cash.

Consider asking:

• How would a significant market decline affect my planned retirement date?
• If I am already retired, could I continue funding my expenses without selling investments at an unfavorable time?
• Do I have adequate cash reserves for near-term needs?
• Does my current investment mix reflect my actual comfort with loss?
• Am I relying too heavily on one company, industry, or type of investment?

These questions are central to the Risk Management portion of The Retirement ROUTE.

Is Your Portfolio Supporting Your Retirement Income Plan?

Many people enter retirement with a savings goal in mind. But reaching that number does not automatically create a dependable retirement income strategy.

In The Retirement ROUTE, we explore an example involving a couple who had accumulated $1 million for retirement, an amount that might initially sound sufficient. Yet projections showed that, based on their spending and financial decisions, their money could run out by age 84.

The lesson is not that $1 million is too much or too little. The lesson is that a portfolio’s value alone does not tell you whether your retirement strategy will work.

Your Social Security benefits, pension income, retirement accounts, taxable investments, cash reserves, taxes, healthcare expenses, and withdrawal decisions must work together.

If you are approaching retirement, consider:

• How much monthly income will you need?
• Which accounts will provide that income?
• When should you begin Social Security?
• What will change when your regular paycheck ends?
• How will you pay for larger or unexpected expenses?

If you are already retired, consider:

• Are your withdrawals tracking with your original plan?
• Has your spending changed?
• Are you withdrawing from accounts in a thoughtful order?
• Could current withdrawals place too much pressure on the portfolio?
• Does your income strategy still support the lifestyle you want?

Your investments should have a purpose beyond simply generating returns. They should help support the retirement income plan you need.

Are Your Investments Truly Diversified?

Owning several investments does not necessarily mean your portfolio is diversified.

Different mutual funds or exchange-traded funds may hold many of the same companies. Employer stock may account for a larger portion of your wealth than you realize. Multiple investments may also respond similarly to the same market or economic conditions.

This can create concentration risk that is not immediately obvious.

A meaningful portfolio review looks beneath the names of individual holdings to understand what you actually own. It considers how your assets are distributed among companies, industries, investment types, and other categories, and whether one area could have an outsized effect on your retirement.

Diversification cannot guarantee a profit or prevent a loss, but it can help reduce the risk of depending too heavily on any single investment.

Have Your Life or Priorities Changed?

Your portfolio should evolve as your life does.

Perhaps retirement is closer than it was when your strategy was created. You may have retired earlier than expected, experienced a health change, received an inheritance, moved, lost a spouse, or decided to provide more support to children or grandchildren.

Even positive changes such as traveling more frequently or purchasing a second home can affect how much income and liquidity you need.

Changes in your family may also make it important to review beneficiary designations and consider how your investments fit into your broader estate plan.

Before focusing on recent market performance, ask a more meaningful question:

Does my portfolio still reflect the life I have today and the retirement I envision for tomorrow?

Look Beyond Recent Performance

It can be tempting to evaluate a portfolio by asking only, “How did it perform?”

Performance matters, but it does not tell the whole story. An investment that performed well may expose you to more risk than your retirement plan requires. An investment that recently struggled may still serve a useful purpose within a properly diversified strategy.

A complete portfolio review should consider:

• Your expected or current retirement timeline
• Your income and withdrawal needs
• Your exposure to market losses
• Portfolio diversification
• Available cash and liquidity
• Potential tax consequences
• Investment expenses
• Healthcare considerations
• Changes in your family and legacy goals

Hope is not a retirement strategy. Your portfolio should be intentionally designed to work with every part of your Retirement ROUTE.

Put Your Retirement Portfolio to the Test

When was the last time you gave your investments a thorough review?

Our complimentary Investment Portfolio Checklist can help you take a closer look at your current strategy and identify important questions to consider as you prepare for retirement or navigate the years ahead.