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Morningstar’s 2022 Portfolio Makeover Week

Christine Benz helps investors check their progress, assess allocations, uncover portfolio gaps and overlap, and upgrade their holdings. Plus: A special Portfolio Makeover Week webcast.

Our annual Portfolio Makeover Week is designed to help showcase real-life strategies for improving portfolios. Our makeovers feature the “Before” portfolios of actual investors at various life stages and asset levels. I provide suggestions for improving those portfolios, touching on asset allocation, asset location, and in-retirement withdrawal rates, among other factors.

You can find a summary of each makeover below. Stay tuned this week to see the full makeovers and for more ideas on how you can make your own portfolio upgrades.

Monday, Nov. 7 | Garrett and Angela | Getting a Second Opinion on Retirement Readiness

“Our financial goals are simply to live comfortably during our retirement, without changing our lifestyle.”

Garrett and Angela’s aims will resonate with the many Morningstar readers who write in each year seeking a check on their plan’s long-term viability as they are on the cusp of retirement. Like this couple, they want to make sure that their portfolios will enable them to maintain their standards of living over the whole retirement.

For Garrett and Angela, that’s at least a 30- or 35-year time horizon. While Garrett is 72 and already receiving Social Security benefits, Angela is just 61. Thankfully, this couple is placing only modest demands on their portfolio currently, because they’re both still working. Because her job is physically taxing, though, Angela would like to retire within the next few years, ideally at age 63. As their retirement date draws close, they wrote in to seek a second opinion on their portfolio, their plan, and their anticipated in-retirement spending.

Tuesday, Nov. 8 | Kate and Eric | Late-Start Couple Turbocharges Retirement Savings

Kate, 44, and her husband Eric, 51, are earning serious money for the first time in their adult lives. The challenge today? How to make up for lost time. “This is by far the most income we’ve had,” Kate wrote, “and we are pouring it into savings.” In their email to me, Kate and Eric were crystal-clear about their goals: “To have at least $3 million in retirement/investments in 18 years; to establish a strong cash savings; to pay off our house by 2040; and to save $80,000-$100,000 for our children’s college education.” Because those are ambitious goals, they need their investments to work as hard as possible in the years leading up to retirement. The couple wrote in to seek a check on their portfolio’s positioning. Kate and Eric are interested in environmental, social, and governance investing, so they would like their “After” portfolio to retain a heavy emphasis on ESG factors.

Wednesday, Nov. 9 | Portfolio Makeover Week Webcast | “5 Portfolio Pitfalls and How to Fix Them”

In this special Portfolio Makeover Week webcast, Christine Benz will walk through five of the most common portfolio pitfalls she has observed in real-life investors’ portfolios. She’ll cover asset allocation in the years leading up to retirement, as well as in-retirement spending rates. She’ll home in on key areas where many investors tend to be underdiversified, and she will also discuss how to contain “portfolio sprawl.” Finally, she’ll share some common problem spots for portfolio tax management, along with tips for improving portfolios’ tax efficiency.

Thursday, Nov. 10 | Gina | New Retiree Confronts Market Turbulence

Gina is experiencing serious market volatility for the first time during her retirement, and it doesn’t feel great. At 72, this biomedical engineer has been retired for about seven years, and she has amassed a solid portfolio. But her parents were both long-lived—92 and 99—so Gina is concerned about the prospect of outliving her nest egg, particularly now that both stocks and bonds have logged losses in 2022 and her portfolio has taken a hit. She wrote in to seek a second opinion on her portfolio and her plan. In addition, Gina has contemplated an annuity purchase to cover some of her living expenses, but she has questions about the prudence of such a big move. “I’m not sure if that makes sense with interest rates going up, my current net worth, inflation, and the pretty large amount of initial premium that would be required,” she wrote.

Friday, Nov. 11 | Logan and Sydney | Positioning a Portfolio in Early Retirement

Logan and Sydney, both age 69, are extremely active and live in a sunny part of the country where they can enjoy biking and hiking year-round. Sydney continues to teach Spanish at the local community college and also conducts private tutoring. Thanks to income from Sydney’s job and a modest level of spending, the couple hasn’t begun drawing any funds from their nest egg.

Yet, even as the couple is highly content with their life right now, a big change is looming: Sydney would like to retire within the next few years. Her retirement, as well as their plans to begin collecting Social Security late next year and required minimum distributions from their IRAs beginning two years after that, prompted the couple to seek a second opinion on their portfolio’s positioning.

Note: Names and other potentially identifying details in the makeovers have been changed to protect the investors’ privacy. Makeovers are not intended to be individualized investment advice, but rather to be illustrations of possible portfolio strategies that investors should consider in the full context of their own financial situations.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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