This philosophy created an asset allocation for retirees that was heavily dependent upon the fixed income markets. Risk in today’s fixed income markets is considerably less predictable. When creating income in a portfolio, investors should examine many different sources of income. Is it time for fixed or variable rate income sources? Are dividend producing stocks inexpensive or overvalued? Is real estate a proper asset to produce income? Can alternative investments like MLP’s create an income stream? In finding these answers, a successful retirement income stream can become multifaceted and flexible.
Some investors have opted for “all-in-one” strategies, where a glide path mutual fund encompasses their entire retirement portfolio composition. These funds become gradually more conservative the closer an investor gets to retirement. Some funds manage “to” the retirement date, while others manage “through” the retirement date. If you own one of these vehicles, do you know what the fund is designed to accomplish? These funds use historical data to project out into the future the ideal asset allocation. We don’t know what the future holds, and advocate investments that have the ability to be flexible.
Successful retirement comes down flexibility. Flexibility of goals. Flexibility of income streams. Flexibility of spending. Flexibility of retirement investments. Flexibility of the overall plan. As you design your retirement plan, take the time to build in flexibility. It will help build peace of mind, and lead to a more successful retirement.