Retiring soon with a portfolio heavy on stocks? It’s a thrilling yet nerve-wracking moment, especially when you realize your financial future hinges on decisions you make today. But here’s where it gets controversial: Is your 90% equity allocation setting you up for success, or are you playing with fire as you approach retirement? Let’s dive in.
Imagine this: You’re in your late 50s, just a few years away from retiring at 60, while your partner, earning a solid $110,000 annually, plans to retire in four to five years. Your portfolio is split 90% into equities (60% U.S. and 40% Canadian) and 10% into cash. Sounds aggressive, right? Well, it is—especially when you consider that you’ll soon start tapping into those savings. And this is the part most people miss: Even if your average returns look impressive, the sequence of returns can quietly sabotage your retirement. Poor market performance early on can erode your wealth faster than you think.
We asked Jillian Bryan, a senior portfolio manager and investment adviser at TD Wealth Private Investment Advice, to weigh in. Her take? It’s time to rethink your risk exposure. “A 90% equity allocation is unusually bold for someone on the cusp of retirement,” she explains. “When markets dip early in retirement, it can disproportionately harm your long-term financial health, even if the overall returns seem decent on paper.”
Here’s the kicker: With markets at record highs, your current strategy might only work if everything goes perfectly. But let’s be real—when does that ever happen? Bryan emphasizes, “The sequence of negative returns can dramatically impact your retirement portfolio in ways you might not anticipate.”
So, what’s the solution? Bryan suggests a bucketed structure plan—a strategy often overlooked but incredibly effective. Here’s how it works:
- Bucket 1 (1–3 years): Cash and short-term fixed income to cover immediate expenses.
- Bucket 2 (4–10 years): Balanced holdings for steady income and moderate growth.
- Bucket 3 (10+ years): Growth-oriented equities to protect your purchasing power over time.
But here’s where opinions might clash: Should you shift to a more balanced approach, say 60–70% equities and the rest in high-quality bonds and alternatives? Bryan argues this can smooth out the ride and reduce the pressure to sell equities during a downturn. However, some might argue that sticking with a higher equity allocation could maximize long-term gains. What do you think?
Your partner’s continued income does provide a safety net, so there’s no rush to derisk entirely. Still, Bryan advises gradually shifting toward a portfolio that can withstand volatility while supporting predictable withdrawals. And this is the part most people miss: Liquid alternative investments (liquid-alts) are an underutilized tool. They can protect your portfolio during market declines and even generate gains when other assets are losing value.
Now, here’s a thought-provoking question: Are you willing to trade potential higher returns for the peace of mind that comes with a more balanced, resilient portfolio? Let us know in the comments—we’d love to hear your perspective.
If you’re grappling with similar financial planning or retirement questions, don’t hesitate to reach out. Your future self will thank you.
