In retirement, you may have pension income and Social Security in addition to distributions from your retirement account. If part of your income is fixed and not invested in the market, how should you invest in your portfolio?
If you are in this position, we encourage you to spend some time really considering your risk tolerance, risk capacity, time horizon, cash flow, and overall comfortability with market fluctuations.
If you determine yourself to have a higher risk tolerance, you could consider using your guaranteed income as a “bond/fixed income proxy” in your overall portfolio allocation. In other words, creating a portfolio that is allocated higher to equities, because your guaranteed income outside of your investment portfolio serves as allocation to bonds/fixed income.
You may decide the best course of action is to allocate a significant portion of your investable portfolio to risk-off assets even if a large percentage of your retirement income comes from Social Security and/or pensions. Ultimately what is right for you depends on your retirement spending goals and how much risk is necessary (and you are able to take) to achieve those goals.
Check out the video below to learn more about investing in retirement.
