What Should Be in Your Retirement Portfolio?

You know how important it is to save for retirement. But how do you choose among all the options to build your retirement portfolio? 

Investopedia points out many of the options, including:

• 401(k)s through your employer
• Traditional, Roth, SIMPLE and SEP IRAs
• Taxable accounts

Inside these accounts, you might hold stocks, bonds, commodities, futures, real estate, cash and other liquid assets and more.

It might seem overwhelming, but you can start with our guide to retirement savings strategies. 

Your Age Matters

One of the most important things to consider in your retirement portfolio allocation is how old you are, and how long you expect to keep working and investing before you retire.

Early in your career, you’ll probably want to invest more aggressively, with more weight in stocks. That’s because stocks have historically had better returns than less aggressive investments. Stocks also have a bigger risk of a decline, but if you’re decades away from retiring your investments probably have time to recover.

As you get older, you may want to shift your investments toward safer options. A financial advisor can help you find the best asset allocation for retirees based on your age, goals, account balances and other factors.

See What Your Employer Offers

One of the best investments for retirement is an employer retirement account like a 401(k), according to the U.S. Department of Labor. That’s because you can contribute pre-tax money, which may lower your tax bill now. Your contributions grow tax-deferred, and you pay taxes when you withdraw money in retirement.

Many employers also match some of your contributions, so it’s usually a good idea to contribute at least as much as you need to get the full match amount.

Make Sure Your Investments Are Diversified

Diversification means that your money is spread out among different types of investments. You can think about it this way: If all of your investments were in one company’s stock, that money would be gone if that company went out of business.

If your money is invested in many different companies, and in a mix of stocks, bonds, cash and other investments, you have a lower risk of losing a lot of money.

Mutual funds, which pool together money from many different investors, may be one way to diversify your retirement portfolio, according to FINRA.

Know Your Risk Tolerance

If you’re invested heavily in stocks, how would you handle a market crash? Stocks have historically performed better than other investments overall, but if the ups and downs are keeping you awake at night, you may need to reconsider your strategies. Plus, your tolerance for risk may go down as you get older.

However, investing in less risky areas can mean less growth in your portfolio, and it’s important for your investments to at least keep up with inflation. 

Get Guidance From a Financial Professional

At Farm Bureau, we know that finding the right mix for your retirement investments isn’t always easy. We can answer your questions and put together a plan that works for you, today, tomorrow and throughout your retirement. Reach out to a Farm Bureau financial advisor to connect.