How should retiree portfolios be allocated?

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With longer lifespans, assuring steady income streams for life means that many retirees will have to invest more aggressively to make the money last. How are advisors putting those plans into action?

Natalie Briaud Pine, a partner of Briaud Financial Advisors in College Station, Texas, has many retired clients. All of her clients investments “are geared toward value. We don’t think anyone can afford to take a ton of risk.”

But with that as a given, some of her preferred investments, such as gas royalties, require a long-term time commitment, 10 to 30 years. But Briaud knows her clients will need some of their assets to be much more liquid than that. “That’s the difficult part, managing that cash piece,” she says.


As a rough guide, she expects that most retired clients will want about 25% of their assets to be reasonably liquid, but to get a more refined view of how much any individual retired client needs as available on short-term notice, Briaud stays in “constant communication” with them so she will know ahead of time if any large expenses will arise.

She typically has her retired clients, rather than just keep cash, which will fail to keep pace with inflation, invest the funds they need liquid in shorter term bonds.

Sheryl Rowling, the founder of Rowling & Associates in San Diego, agrees that getting the right amount of risk in retirees’ portfolio to meet long-term income needs creates a fundamental challenge for a financial planner.


“There is always a risk/return trade-off when determining an appropriate asset allocation,” she says, “On one hand, retirees cannot be fully invested in bonds and hope to outpace inflation. On the other hand, they can’t greatly overweight equities without volatility posing a real threat.”

She follows the ratios to which many advisors adhere. “In my practice, we generally recommend allocations ranging from 40% equities/60% fixed income to 60% equities/40% fixed income. We believe that this type of allocation will provide inflation protection while limiting downside risk over the long run. I sometimes have clients who say, ‘I might not live long enough to recover from a down market.’”

Rowling’s reply: “Then you don’t need to worry about eating into principle!”

Miriam Rozen, a Financial Planning contributing writer, is a staff reporter at Texas Lawyer in Dallas.

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