I’m a 65-year-old preparing for retirement within the next three to five years. I’m looking at different types of retirement funds. Would adding stocks that are dividend-structured along with gold and cryptocurrencies be a good mixture?
-Earl
Shifting from building wealth for retirement to distributing wealth during retirement involves considering preferences related to your life and money. Those factors can include your risk capacity, risk tolerance, lifestyle preferences, longevity, needs, diversification and tax location. Retirement planning happens in stages, with a pre-retirement stage occurring over three to five years during which you begin adjusting your mindset, lifestyle and investments to fit your next stage.
(If you have additional questions about investing or retirement, this tool can help match you with potential advisors.)
How to Structure Your Portfolio
The structure of your retirement portfolio should reflect your needs, lifestyle, risk tolerance and capacity, and financial resources. Diversification across tax location, investment type, time horizon and goals will help optimize your retirement portfolio.
Start by assessing your “sleep-well-at-night meter.” Your risk tolerance may or may not match the risk you need to maintain purchasing power and growth. Maximizing for factors such as growth can help you meet your longevity and medical expense needs.
Second, select fundamental investments that meet your foundational lifestyle needs, commonly called your core portfolio. For example, three to four low-cost, diversified index or exchange-traded funds (ETFs) may suit your core portfolio across equities, bonds and domestic and international investments.
Your market equity participation will depend on how much guaranteed income coverage you have from resources such as Social Security and your risk tolerance.
If you have the capacity and resources to accept volatility and risk for potential additional growth opportunities, consider adding speculative assets to your portfolio, such as gold and cryptocurrencies, and take advantage of bear market corrections.
Let’s dive a bit more into each of these categories of lifestyle and risk considerations. (If you have additional questions about investing or retirement, this tool can help match you with potential advisors.)
Longevity
Although Americans’ average life expectancy has taken a hit in recent years, they still enjoy long retirements by historical standards. The average life expectancy is approximately 80 years for women and 74 for men, respectively, according to the Centers for Disease Control and Prevention. These are averages, meaning retirement can span 25 to 35 years. Longer time spent in retirement requires more funding, and more funding requires a balance of conservation and growth.
