Achieving Financial Security: How To Structure Your Retirement Portfolio

Do you know the golden rule of building a retirement portfolio with stocks for passive income？ As the founder of Mitlin Financial and author of “Financial Planning Made Personal,” Lawrence Sprung puts it, “Everything is in moderation.” Speaking on Yahoo Finance Live recently, he explained how investors can effectively structure their investment portfolios to enjoy the dividends of passive income during retirement. If you are contemplating how to generate passive income through stock trading and other investments, the WikiFX App can be an indispensable tool in your financial planning arsenal.

Sprung pointed out that investing should not merely revolve around stocks. He emphasized the importance of a balanced portfolio that caters to an individual's risk tolerance and time horizon. Your retirement portfolio should be an amalgamation of various asset classes, including stocks, bonds, total stock market index funds that mirror the complete US market returns, and even a touch of alternative investments.

Amidst the market uncertainties witnessed over the past year, the merits of a diversified portfolio have become more pronounced. However, creating an asset allocation that perfectly aligns with your financial goals requires due diligence and careful consideration of various elements.

“Building out an asset allocation that is right for them includes multiple types of stocks—large-cap, mid-cap, and small-cap. Similarly, bonds could include government and international bonds,” Sprung suggested. He also hinted at the potential of alternative investments, like real estate investment trusts or mutual funds that invest in them, for bolstering retirement income.

In terms of the proportion of your retirement savings allocated to equities, conventional wisdom suggests that the figure should equate to either 100 or 110 minus your age. As an example, a 57-year-old individual with a moderately aggressive risk tolerance might have 65% of her retirement savings invested in stocks and the remaining 35% in bonds. This approach allows her to benefit from the long-term growth potential that stocks generally offer compared to fixed-rate options such as bonds, money market accounts, or certificates of deposit.

Nevertheless, maintaining discipline in your investment approach is essential, especially when the stock market is performing well. Overweighting your portfolio with stocks can leave your savings exposed to significant risks when the market turns bearish.

Aside from stock investments, there are a number of other potential income streams that you can use to supplement your retirement income. These could include a typical pension, an employer-provided retirement plan such as a 401(k), income-producing real estate, or even your own small business. “It's really a flavor for everyone,” Sprung emphasizes, “it's just a matter of finding what's right for you in terms of what your goals are, your risk profile, and your time horizon are.”

Alternative assets, such as real estate, may not appeal to every retiree. Many retirees would rather avoid the problems that come with handling such investments. In such circumstances, real estate investment trusts, which provide ownership in a broad property portfolio as well as the possibility of an income stream, maybe a better option.

However, not all alternative investments are created equal, and some have unique dangers. “Crypto is something that, in most cases, they can easily convert to cash, assuming that crypto is still around and viable,” he explained.

For many retirees, Social Security continues to be a crucial income stream. However, it is projected that Social Security's reserves will be depleted by 2033 unless Congress takes action. With this looming reality, it's imperative for millennials and subsequent generations to start planning alternative income streams for their retirement.

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News 2023-08-01

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