THE BLOG

Making Your Portfolio Retirement Ready

05/22/2015 02:41 pm ET | Updated May 21, 2016

For many people, one of the biggest adjustments in retired life is learning how to manage their money without the regular income sources they've grown accustomed to in their working years. As retirees get nervous about their ability to cover everyday expenses, many will take a more conservative approach to their finances in an effort to preserve the money they have worked so hard to save. In fact, Voya Financial's recent Voya Retire Ready Index found that nearly half (48%) of workers and 68% of retirees report that they invest their assets conservatively.

By holding a defensive posture however, investors may be missing out on opportunities to potentially grow their portfolios and bolster their current or future savings. Below are a few tips to consider when developing your retirement portfolio to ensure that you are taking a smart approach to growing and maintaining your nest-egg.

Find Your Income
Many investors feel a sense of anxiety around finding income sources that will sustain them throughout retirement. The Voya Retire Ready Index found that about a quarter of workers anticipate needing to work in retirement to replace half of their income or more. Despite this worry, four in ten retirees and three-quarters of workers have never calculated what level of income they actually need to replace in retirement. The first step here is to meet with an advisor or leverage an online retirement tool like Voya's myOrangeMoney to determine what your retirement budget should look like.

From there, investors can determine how to best leverage their portfolios to, again, make their money work for them. Using a vehicle like an annuity that offers regular payouts may help people feel more secure in retirement knowing that there is the potential for regular income on the way each month.* Additionally, investors should consider setting up a withdrawal schedule for their retirement accounts (401(k), IRA, etc.) to serve as a source of income once they've stopped working. This way, you know exactly when you'll be getting money into your bank account.**

Don't be Afraid of Some Risk
If you are in or close to retirement, you may think that now is the time to pull out of the market to make sure that you don't lose any of those funds you've worked so hard to save over the past decades. When evaluating your portfolio though, it is important to remember that not all risks are bad. By excluding yourself from the risk of the marketplace, you are also keeping yourself from potential opportunities to make your money grow.

To get started, meet with your advisor to determine your risk tolerance to make sure that you are comfortable and confident in your investing decisions. Look for investments that have a "strong and steady" strategy over the long run.

Diversify
Regardless of your risk tolerance, diversifying your portfolio may be essential to long-term performance. Being too heavily weighted in any one sector can expose investors to a great deal of risk - you never want to put all your eggs in one basket!

When appropriate, a comfortable balance for late-stage pre-retirees and early retirees is a mix of fixed income, bond and equity investments. Within the equity portion, investors can follow the old 80/20 rule: 80% solid stocks and 20% growth stocks. This may help maintain a steady hold on your investments while still having some slightly higher-risk exposure to take advantage of favorable moves within the market. While using diversification as part of your investment strategy doesn't assure or guarantee better performance and can't protect against loss in declining markets, it is a well-recognized risk management strategy.

Maintain Your Position
Once you've set up your portfolio and figured out a schedule for retirement income, step back and trust your plan. Watching stock tickers go up and down on television or computer screens may make some people consider adjusting their investments, but one volatile day in the market is no reason to throw out your entire strategy.

Before making any major changes, check in with your advisor to determine if today's market moves will have a long-term impact or are just a temporary hiccup that will even out over the course of a week or two.

Stay the course, rebalance annually and trust that, by diversifying, you are on your way to creating a strong portfolio that may serve you for years to come.

* All guarantees are based on the financial strength and claims paying ability of the issuing insurance company.

** Note that money distributed from tax-deferred investments are taxed as ordinary income when distributed. Early withdrawals taken prior to age 59½ will be subject to an IRS 10% premature distribution penalty tax, unless an IRS exception applies.

Voya Retirement Coach Jacob Gold is a third generation financial advisor with Voya Financial Advisors, Inc., a broker-dealer of Voya Financial®. He is the author of the upcoming book, "Money Mindset: Formulating a Wealth Strategy for the 21st Century" (Wiley & Sons, September 2015) and "Financial Intelligence; Getting Back to Basics after an Economic Meltdown", which was published in August 2009. Gold is a CERTIFIED FINANCIAL PLANNER™ practitioner and Series 7, 24 and 66 securities registered.

8 Ways To Prepare For Retirement