Rebalancing in Retirement

While you’re making contributions to your retirement plan(s) consider rebalancing your investments annually to maintain your chosen asset allocation.* It’s easy to do simply by contributing less to the investment class that’s forging ahead and more to the class that’s lagging.

A Different Process

Once you’re retired and no longer contributing to your plan, the process of rebalancing can be more complicated. Instead of allocating more or less money to one asset class, you’ll have to sell investments to reach your desired allocation. Typically, if you’re taking required minimum distributions from your tax-deferred retirement accounts, rebalancing can be part of that process.

Why Rebalance?

Rebalancing your portfolio brings your asset allocation back in line with the investment mix you originally chose. Rebalancing may be even more important in retirement than it is while you’re accumulating assets. That’s because fluctuations in your allocations matter less due to your longer time frame for recouping losses. Once you’re retired, however, your goal will be to maintain your savings to ensure you’ll have enough money to last throughout your retirement.

Reduce Risk

Taking too much risk with your retirement savings may result in losses that can leave you without enough income for the lifestyle you envisioned. Rebalancing your accounts may help reduce the risk that your portfolio won’t be able to recover from a drop in value.

Control Volatility

Holding investments that are prone to wide market swings can be detrimental to your savings in retirement. If you have the option, selling off any volatile securities you’re holding can help keep retirement accounts on a more even keel.

What You Can Do

There are several steps you can take to preserve your retirement funds and make rebalancing easier. Your financial professional can help you create strategies for maximizing your retirement income.

*Asset allocation won’t guarantee a profit or ensure against a loss but may help reduce volatility in your portfolio.