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Asset Allocation for In-Retirement Portfolios
Slide 2: Asset Allocation for In-Retirement Portfolios
Constructing an in-retirement portfolio requires balancing income, stability, and growth. You need a portfolio that is aggressive enough to ensure your money lasts, but not so risky that you could face severe down swings. And you need short-term liquidity to cover near-term expenses without having to resort to selling assets that may be temporarily depressed in a down market.
Slide 3: Asset Allocation for In-Retirement Portfolios

First, set aside a cash cushion. You should have two to five years' worth of living expenses in highly liquid investments, such as savings accounts, money markets, and CDs. If you have other sources of income, such as Social Security, you can reduce the amount accordingly.

If you are confident in your portfolio's ability to last throughout your retirement, you can keep closer to five years' worth in these highly liquid accounts, because you may have less reason to take on additional risk.

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Slide 4: Asset Allocation for In-Retirement Portfolios

Next, determine an appropriate asset allocation. Looking at target-date funds for your retirement date can help give you a sense of an appropriate breakdown, but there is substantial variation between target-date offerings. Some target-date providers emphasize reducing volatility and have more conservative allocations. Other target-date funds focus on minimizing "longevity risk," or the possibility of outliving your money. These have more aggressive allocations.

If you're not sure which side of the longevity-versus-volatility debate to come down on, you may find it helpful to look at the median weightings in each asset class in an effort to arrive at a target date fund "consensus" view of appropriate asset allocations for those in or nearing retirement. See this article for more details.

Slide 5: Asset Allocation for In-Retirement Portfolios

Once you've set your allocation, it's time to deal with your actual investments. Revising your allocation may simply require adjusting your existing holdings, or you may want to add a few new ones. You'll want to add inflation protection to your portfolio--as you shift more of your portfolio into fixed-income, it becomes more difficult to keep pace with inflation. This article details the process of getting a portfolio retirement-ready.

Slide 6: Asset Allocation for In-Retirement Portfolios
As you craft your retirement portfolio, look for opportunities to streamline your holdings. Paring your portfolio down to a handful of investments will make it easier to monitor. Also consider combining redundant accounts, such as multiple IRAs, into a single account. Simplifying your investments will reduce your oversight responsibilities over the years.
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Asset Allocation for In-Retirement Portfolios
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