Make a Plan

Transitioning into retirement is an exciting phase of your life. With extra time on your hands you can pursue your passions, as well as find new ways to enrich your life and the lives of others. Moving from a full time job to retirement also has implications for your financial plan and asset allocation strategy, as you'll be moving from the "accumulation phase" to the "distribution phase."

The make-up of your portfolio when you're working compared to when you're retired can be very different. Rather than putting money aside to build up your retirement nest egg, you'll be making withdrawals to meet your living expenses. In addition, market volatility becomes a bigger issue, because you won't have as much time to ride out the market's inevitable ups and downs.

In some ways, the asset allocation strategy you employ is a balancing act. On the one hand, you'll need investments that generate income to help replace your paycheck. On the other hand, you'll want to maintain a certain portion of your portfolio in investments that offer growth potential as a hedge against inflation.

The chart below represents a hypothetical approach that covers both needs. Cash inflows, such as income-generating investments, Social Security, pension payments, and guaranteed income vehicles can help support your day-to-day expenses. In contrast, the managed portion of your portfolio can also help cover everyday expenses, as well as your special or discretionary expenses, such as those associated with travel, or helping to fund a grandchild's college education.

Retirement Phase of Asset Allocation

Action Steps

Of course, the chart above is not a recommended asset allocation strategy for your portfolio. Rather, you'll want to consult with your financial professional to review your current asset allocation strategy, as well as discuss your short- and long-term retirement goals and level of risk tolerance. Through this exercise, your financial professional can then develop a strategy that's tailored to your individual needs. In addition, MainStay Investments also offers a number of tools to help. To learn more, call 800-MAINSTAY (624-6782).