Retirement Portfolio Discussions
Pursuing Higher Growth for Longer Retirements
The longer retirements last, the greater the need for long-term growth
- Life expectancies continue to rise. For a couple at age 65, there is now an 90% chance at least one spouse will live to 80 and a 48% chance of reaching 90.
- At retirement, clients may have to prepare for the very real possibility of another 30 years of living expenses - ample time for long-term investments.
- Equities have historically delivered the long-term growth retirees need to combat inflation, maintain living standards and reduce longevity risk.
Equities are needed to pursue higher returns for goals with longer time horizons
- More stable and liquid assets form the foundation of a retirement portfolio. They are typically used to pay for necessities such as food, housing and medical care.
- Once a client's basic needs are addressed, they may be more comfortable with some equity exposure for "wants" and for longer-term legacy goals.
- Compartmentalizing equities may help clients maintain consistent exposure and avoid emotional decisions as they encounter volatile markets or begin tapping into assets.
Clients typically underperform because they move in and out of equities in an attempt to time markets
- Establishing clear objectives and risk tolerance is vital to keeping clients invested long enough to capture the market's full potential.
- Even younger clients with longer time frames may now be tempted to time markets or avoid equities, increasing the risk of missing out on returns.
- Diversifying equities as part of an even broader portfolio can help avoid the dramatic fluctuations that cause investors to overreact and underperform.