Portfolio Changes to Make Before, and During Retirement

Summary

Build Your Retirement Portfolio Around Actual Spending

Before changing investments, get specific about your cash flow. Utilities, groceries, mortgage payments, travel, and potential home purchases all help determine what your portfolio needs to provide. Healthcare expenses also deserve attention, particularly when retirement begins before Medicare eligibility.

Gross salary alone does not tell you what retirement costs. Michaela describes a planning conversation involving a client earning approximately $500,000 who questions whether $150,000–$200,000 in annual retirement spending is enough. Reviewing taxes, substantial retirement savings, and college expenses helps explain the difference between earnings and the amount supporting the household’s lifestyle.

The starting point is honest spending information. What you hope to spend on groceries or gas may differ from what actually leaves your accounts. Building a plan around those real numbers gives investment and withdrawal decisions a clearer foundation.

Size the Cash Bucket Around Portfolio Withdrawals

Wiser’s approach generally includes a two-year cash bucket to support withdrawals during market declines. Its size depends on how much money needs to come from the portfolio after accounting for other income.

A retiree with pension and Social Security income may need less from investments than someone whose portfolio covers most household expenses. Cash held in outside savings accounts also belongs in that conversation.

That reserve addresses an emotional challenge as well as a spending need. William observes that investing during a market decline can feel like an opportunity while you still earn a paycheck. Taking withdrawals during the same decline can feel like losing ground—even when those withdrawals come from money already set aside for spending.

Cash provides flexibility, but holding too much also raises concerns about inflation. The balance between available spending money and long-term growth needs to reflect the individual plan.

Retirement Does Not Automatically Mean Less Stock Exposure

A retirement lasting 30 or 40 years still creates a need to consider growth. Moving everything to cash may feel reassuring, but it does not address every risk.

Although a 60/40 portfolio often serves as a retirement benchmark, it is not a universal prescription. Spending needs, other income sources, comfort with market fluctuations, and inheritance goals all influence the investment mix.

William offers the example of an executive receiving deferred compensation and a substantial pension. When that income comfortably supports spending, the portfolio may have little immediate withdrawal demand. In that situation, a higher stock allocation may fit the plan.

An account intended for children can also have a different purpose from one funding monthly expenses. Retirement age alone does not determine how every account should be invested.

Choose Withdrawal Sources With Taxes in Mind

The account that feels easiest to spend from is not necessarily the most appropriate choice. Michaela notes that some clients assume Roth money should come first, but withdrawal decisions require a broader tax conversation.

Traditional IRA withdrawals during lower-income retirement years may help address potential tax pressure from future required minimum distributions. Roth conversions may also deserve consideration during what William calls an “income valley”, a period before pension or Social Security income begins.

Tax projections help compare those options. They can also reveal situations where additional ordinary income affects a tax credit, even without moving someone into a higher tax bracket.

There is no fixed withdrawal order for everyone. Brokerage accounts, traditional IRAs, and Roth accounts may work together differently depending on retirement timing, spending, and family goals. A Roth withdrawal, for example, may help fund a large purchase while limiting additional taxable income. Preserving Roth assets for potential growth or an inheritance may matter in other circumstances.

Required distributions also do not automatically create a reason to spend. Money that is not needed for living expenses may remain invested in a brokerage account after distribution.

Revisit the Portfolio When Retirement Changes

Retirement spending and income do not stay fixed. Starting Social Security, returning to part-time work, facing higher healthcare costs, or losing a spouse can change how much the portfolio needs to provide.

Michaela mentions retirees who choose to work at Home Depot or Costco. That additional paycheck may reduce withdrawal needs and prompt a review of cash reserves.

A planned move creates another reason to adjust. Money needed for a home purchase in three to five years may warrant a more conservative allocation than assets intended for later retirement.

An inheritance can change the picture again, potentially affecting mortgage decisions, spending needs, or goals for the next generation. These developments give portfolio reviews a concrete purpose beyond reacting to market movements.

Ask Three Questions Before Making Changes

A useful review begins with three questions: What am I actually spending? Does my investment mix support the amount I need to withdraw? And do I understand which accounts fund those withdrawals and why?

A market decline alone does not automatically call for a more conservative portfolio. Reviewing cash flow, investment risk, and tax projections together helps connect any proposed change to the retirement you are living. If you would like to review your portfolio together during a complimentary consultation, please reach out to us today.

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