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Strike a Balance for a Secure Retirement

September 12, 2023
Hancock Whitney Financial Planning
Hancock Whitney Financial Planning

As pensions disappear and life spans increase, Americans are increasingly tasked with funding their own retirement by building a sizable nest egg. That tempts some people to focus on savings growth. But growth alone may not give you everything you need to enjoy the retirement you want. You also need security. Let’s look at why you need to strike this balance and how to do it.


Strike a Balance for a Secure Retirement


The ups and downs of market-dependent investments

High returns on your savings tend to come from market-dependent investments, such as stocks. These options also typically offer some income flexibility in retirement — if you need a little more money this month, you can sell additional shares from your portfolio.

But using this strategy alone comes with greater risk — something that’s particularly meaningful as you enter the critical corridor starting about five years before your goal retirement date. This is when you’re more susceptible to market drops since you’re getting ready to start taking income from your portfolio.

For instance, when you’re in the “income fueling assets” phase, making contributions to your retirement accounts, if there is a market downturn, you may be able to recover. Your contributions could even purchase more stock, potentially building your portfolio.

But when you’re in the “assets fueling income” phase and taking withdrawals, a market downturn can create losses your portfolio may not recover from. For example, if stocks are down 35% and you withdraw 5% from your account, that’s equivalent to almost a 40% decrease in your account (assuming the portfolio is 100% stocks).


Even out the risk

Secure income sources balance this risk because they are generally less market dependent. They offer more stability since your income is less likely to go down in a down market. In short, they allow you to secure a portion of your monthly retirement budget. The downside is that secure income sources generally offer less flexibility and inflation protection than a market-dependent investment.

In the past, many people could rely on pensions as a secure income source to carry them through retirement, but few people enjoy that luxury today. Social Security is another secure income source, but it probably won’t make up more than 20% to 30% of your retirement income.

That means you’ll need to supplement the secure portion of your portfolio with other instruments. You’ll have many choices, including bonds of nearly any type — such as municipal and Treasury bonds — as well as bond funds and annuities.


Balance needs and wishes

Secure income sources do more than balance your portfolio and help you weather market fluctuations. They can also act as a sort of “paycheck” that lets you cover your regular, essential expenses in retirement, such as your mortgage, food and health care.

With these basics managed, you can give the growth portion of your money the time it needs to build funds you can later use for discretionary spending on your retirement wants and wishes.

The challenge can be striking that correct balance. Since everyone’s financial situation and retirement goals are different, the balance will also vary by person. You can start by considering what your essential expenses will be in retirement, then build the secure income side of your portfolio around meeting that need. You can then work on a diversified, growth-oriented aspect.

A Hancock Whitney Private Banker can assemble a team of knowledgeable professionals to help you strike the right balance for your unique situation and retirement goals. 


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The information, views, opinions, and positions expressed by the author(s), presenter(s), and/or presented in the article are those of the author or individual who made the statement and do not necessarily reflect the policies, views, opinions, and positions of Hancock Whitney Bank. Hancock Whitney makes no representations as to the accuracy, completeness, timeliness, suitability, or validity of any information presented.

This information is general in nature and is provided for educational purposes only. Information provided and statements made should not be relied on or interpreted as accounting, financial planning, investment, legal, or tax advice. Hancock Whitney Bank encourages you to consult a professional for advice applicable to your specific situation.

Hancock Whitney offers investment products, which may include asset management accounts, as part of its Wealth Management Services. Hancock Whitney Bank is a wholly owned subsidiary of Hancock Whitney Corporation.

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