Building an Efficient Portfolio for Retirement
Early Accumulation Phase (Young Investors)
* Maximize returns for a given risk level.
* Consider target-date funds to simplify asset allocation and decision-making.
Approach Retirement Phase (Nearing Retirement)
* Professional guidance becomes more crucial for personalized risk assessment and strategy.
Retirement Phase
* Diversification is key: Mitigate risks such as inflation, sequence of returns, and longevity.
* Optimal portfolio varies: Each retiree's goals and circumstances influence the ideal asset allocation.
* Bonds not always reliable diversifiers: Historical data shows stocks become less risky relative to bonds in the long run.
* Maximize after-tax returns: Allocate bonds to tax-advantaged accounts and stocks to taxable accounts for enhanced returns.
* Managing longevity risk:
* Delay claiming Social Security or purchase an income annuity to extend portfolio lifespan.
* Assess personal life expectancy using tools like Longevity Illustrator or Social Security calculator.