What You Should Consider Including in Your Retirement Portfolio

If you build up your retirement portfolio when you are young, you can enjoy a financial free life in your golden years. ShutterStock

When setting up a retirement plan, many of us have been taught that as a rule, we should save at least 10 to 15 percent of our annual pre-tax salary. Yet, even as we see the cost of living increase, and adjusting our savings for any hurdles that may be thrown across our path—creating a rock-solid retirement portfolio helps you set up financial security for your golden years.

Building a retirement portfolio has various components, and one should consider how annual growth in the overall market will help increase your retirement savings. Financial experts and brokers will also suggest that you diversify your portfolio, opting to create better opportunities for growth and annual compounding.

Creating financial wealth over time is one of the best components for retirees, as this helps them be more stable and financially independent once they permanently leave the workforce.

The median income for an average American employee was $58,000 per annum in May 2021—yet, making sure you can save enough of your salary for the coming years, while still living comfortably can easily become a daunting task.

As some of us may be moving into retirement in the next few years, consider what you should include in your investment portfolio when leaving the workforce behind.

Everybody's retirement portfolio will be different. Considering your situation, habits, hobbies, dreams, and the risks you can shoulder, build up your portfolio that can meet your needs. tmcphotos/ShutterStock

Choose Stocks

Understanding the stock market and its unpredictability has always left many investors with cold feet. Although the stock market comes with its pros and cons, it remains one of the best ways to improve portfolio diversification and establish a steady income stream.

Stocks can be tricky, and at first, you will need to have a clear understanding of how it works and where potential opportunities may be. Even more, you should be aware of any pitfalls or shortfalls you may come across and how you can use your knowledge to grow stock yields.

Purchase High Yielding Bonds

Bonds have always been considered a great investment when planning for retirement. When creating your retirement portfolio, purchase high-yielding bonds with maturity dates. Bonds that are more established, and have matured with the market can provide better income flow and monthly returns.

Dividend-Paying Stocks

Investors who enjoy the stock market as a hobby or a full-time job have always found that investments that offer dividends can help grow portfolio value. Dividend-paying stocks may offer median returns at first, but over time, these stocks can help grow investments and help diversify your portfolio.

Investing in dividend-paying stocks also keeps you more in the know about how your portfolio is performing and pushes you to seek more lucrative dividend stock opportunities. Some dividend returns can help cover monthly expenses when you retire, but long-term involvement is what you should aim for.

Additional Income Sources

Besides bonds and stocks, consider creating additional income sources. Even at the age of retirement, many people are still looking for new opportunities to work and create an additional stream of income.

Other income sources such as freelancing, working from home, and annuities are all considered additional income sources which can grow your investment portfolio.

Invest your Pension

Organizations that offer pension schemes automatically help employees save up for their retirement. While these savings may not be enough to cover monthly expenses, or act as a safety net during unpredictable circumstances, consider what you can do with your pension.

A pension should be used as a savings account and should be kept safe in a compounding bank account. Of course, one shouldn’t go and invest the full 100 percent of your pension plan. Rather see where you can allocate money, and how it can build you a steady income stream.

High Yielding Savings Account

The power of compounding has remained one of the strongholds for many who start saving up early for their retirement. Between the ages of 25 and 65, most Americans will set aside a large portion of the annual salary in a compounding savings account.

Over time, this will grow and generate interest, which in return should offer you more than your initial investment. One thing about high-yielding savings accounts is that they are low risk, and you can pump as much money into it as you like. Overdue course it would be advised to liaise with a financial advisor about how you can leverage your savings even more. This will help your financial growth happen faster than you ever thought possible.

Retirement is not scary. Plan in advance, you will enjoy the free life when you retired. fizkes/ShutterStock

The Size of Your Retirement Portfolio

Once you have an idea of where you’re looking to channel your savings towards, consider the pace at which you want your portfolio to grow. The more investments and savings you have, the quicker your portfolio will grow and accumulate more interest.

The size of your portfolio will depend on your current financial situation. Thus it’s important to consider:

Make Saving a Priority

Always put away some of your money, even if it’s five or seven percent each month. The more you save, the more you create a safety barrier for you to live on when you enter retirement.

Know Your Cost of Living

As you age, your needs for certain services and goods change. Retirees consider it more important to have life insurance and proper medical aid over entertainment subscriptions. Calculate what your current cost of living is, and how you should invest according to your needs.

Change your Strategy

Once you have a better idea of how and where you’d like to invest some of your money, find a strategy that works for you. More importantly, adjust your strategy as your needs change, and what you feel will work not only for your portfolio but also for your investments. Always keep a finger on the pulse, and be present when adjusting.

Increase or Decrease Your Portfolio Size

Too much of a good thing can lead to greater risk, just as too little of something will offer you fewer benefits. As you adjust your investment strategy, see where you can perhaps increase or even decrease certain areas.

While having too many stocks over bonds can be a risky strategy, consider how increasing investments for newer opportunities can help grow your current portfolio size.

Calculate your current life cost and you can have an idea how to estimate how many you need annually when you retire. Then you can make a good plan for your retirement portfolio. Jacob Lund/Shutterstock

Final Considerations

Financial security during your retirement is one of the most important parts of establishing an investment portfolio for your golden years. While it’s important to be smart with your money, and contribute towards your savings—always make sure to include specific aspects of investment and trading with it.

Finally, be aware of how over time your financial situation may change, and how adjusting your portfolio accordingly will be needed as well. There are different ways to establish financial security, but when it comes to your investment portfolio, diversification is one of the most crucial elements one should always remember.

By Pierre Raymond

The Epoch Times Copyright © 2022 The views and opinions expressed are only those of the authors. They are meant for general informational purposes only and should not be construed or interpreted as a recommendation or solicitation. The Epoch Times does not provide investment, tax, legal, financial planning, estate planning, or any other personal finance advice. The Epoch Times holds no liability for the accuracy or timeliness of the information provided.