Everyone has a different vision of what retirement looks like. Setting a vision for how you want to spend your “golden years” is the first step in establishing your retirement portfolio.
Most people go through three phases in their financial journey—wealth accumulation, wealth preservation, and income generation—each with specific investing implications.
Understanding the phases of retirement and what assets are appropriate for each phase is complex and likely to require assistance. This is especially important for international employees and those who may be unsure of where they will retire.
Investing in retirement can feel daunting, but it can also be fun.
Estimating how much you need to save for retirement requires us to daydream.
You can ask yourself:
What do you want your retirement to look like?
How do you plan to spend your time in retirement?
Where do you want to live?
Everyone has a different vision of what they want their retirement to look like. Whether you wish to travel, volunteer, focus on family and friends, or spend time on hobbies will impact how much you’ll need to save.
After envisioning what you’d like your retirement to look like, it’s time to turn your attention to your investments and the steps you can take to ensure a comfortable retirement.
Understanding your risk tolerance is integral to investing for retirement. While everyone’s risk tolerance is unique, there are three general phases in a financial journey that most of us travel through on the path to retirement.
Phase 1: Wealth Accumulation
In the early years of your career, portfolios should focus primarily on growth. With decades to benefit from potential compound interest — the interest you earn on interest generated by a portfolio — and more time to recover from market swings, the asset allocation in the accumulation phase should tilt heavily toward investments with higher potential for growth. This does not mean holding one or two high-flying stocks but diversifying risk across different markets and looking at various investment types depending on the economic situation.
Phase 2: Wealth Preservation
Phase 3: Income Generation
Hypothetical allocation to equities before and during retirement
Chart description: This chart highlights three key investment phases on retirement: wealth accumulation, preservation, and income generation. Equity allocation to the portfolio starts at 100% during the wealth accumulation phase. Equities tend to decline gradually to ~40% during the wealth preservation stage until the income generation stage (retirement).
Of course, any portfolio should be reviewed regularly and more frequently as retirement approaches. Mapping out a budget, periodically reviewing your portfolio, and understanding the impact of taxes on your income in retirement are all crucial to a successful and hassle-free retirement.
To help make this process easier, Astra Worldwide offers a highly successful choice of risk-rated portfolios to take the complexity and hassle out of investing. These portfolios are actively managed using all types of different asset classes to save our clients the headache of managing their portfolios and knowing when to make changes. Our active portfolios are ideal for international clients as they consider the current economic circumstances affecting different investment types. This means clients will benefit more by overweighting various asset classes at different times depending on the economic cycle.
If you want guidance on building a portfolio for the three key phases of a successful retirement, please drop us a message, and we can schedule an initial 15-minute free consultation.
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