Smart retirement investing questions

[UNITED STATES] In an era of longer lifespans and persistent inflation, traditional retirement strategies are being reevaluated. Retirees no longer fit a one-size-fits-all mold, especially when it comes to managing investment allocations. According to the Wall Street Journal, many financial planners are encouraging older Americans to ask themselves four pivotal questions to ensure their portfolios reflect both current needs and future risks.

The shift in retirement planning comes as economic volatility and demographic changes redefine what it means to be "retired." With more Americans working part-time or pursuing encore careers, the line between active income and traditional retirement has blurred. This evolving landscape demands portfolios that can adapt to both market fluctuations and changing personal circumstances.

These questions go beyond conventional advice, urging retirees to consider how lifestyle, longevity, and economic conditions impact financial decisions. Here’s what experts say you should be thinking about.

Do My Investments Still Match My Financial Goals and Time Horizon?

While retirees are often encouraged to reduce equity exposure, many may still need stocks for long-term growth—especially with retirement spanning 25 to 30 years for some. According to Vanguard, a 65-year-old couple has a 50% chance one partner will live past age 90.

Recent research from the Stanford Center on Longevity underscores this point, noting that retirees who maintain a moderate equity allocation (30-50%) historically fare better in preserving purchasing power over multi-decade retirements. However, the study also emphasizes the importance of aligning stock exposure with individual comfort levels, as behavioral reactions to market swings can be as consequential as the swings themselves.

"People are living longer, so keeping some exposure to equities is important," says Christine Benz, director of personal finance at Morningstar. However, she cautions that allocation should still reflect risk tolerance and withdrawal needs.

Key Consideration: If your time horizon is longer than expected, a mix of stocks and bonds (e.g., 50/50 or 60/40) may provide both growth and stability.

Is My Portfolio Flexible Enough to Withstand Market Volatility?

2022’s market downturn served as a wake-up call for many retirees. A diversified portfolio must be designed not just for average conditions but for downturns. Holding a cash buffer—often 12 to 24 months of living expenses—can reduce the need to sell during market lows.

The rise of "liquid alternative" investments, such as managed futures or market-neutral funds, has also gained traction among retirees seeking volatility dampeners. While these instruments come with their own complexities, financial advisors note they can complement traditional assets by providing uncorrelated returns during equity sell-offs.

"You need dry powder when the market goes south," says Steve Parrish, co-director of the Center for Retirement Income at the American College of Financial Services. "It buys you time."

Tactic: Use a “bucket strategy” that segments investments into short-term (cash), intermediate (bonds), and long-term (stocks) categories to manage risk and income needs effectively.

Are My Withdrawal Rates Sustainable in Today’s Environment?

The 4% rule—once a staple of retirement planning—is under scrutiny. In a low-interest, high-volatility world, some financial advisors suggest reducing that rate to 3.5% or even lower, depending on market performance and personal circumstances.

A 2023 Morningstar study found that retirees who adopt a "guardrails" approach—adjusting withdrawals up or down based on portfolio performance—increase their odds of success by 30% compared to fixed-rate strategies. This method, while requiring more active management, can help mitigate sequence-of-returns risk, particularly in the critical early years of retirement.

According to Fidelity, retirees should reassess withdrawal strategies annually, factoring in market performance, expenses, and health-related costs.

Tip: Work with a financial advisor to use a dynamic withdrawal strategy that adjusts based on portfolio performance and inflation.

Am I Accounting for Rising Healthcare and Long-Term Care Costs?

Healthcare is one of the largest and most unpredictable retirement expenses. A 2024 Fidelity estimate put the average cost for a retired couple at over $315,000 throughout retirement—not including long-term care.

New legislative proposals, such as the expansion of Medicare coverage for dental and vision care, could alter these projections. Meanwhile, private-sector innovations like employer-sponsored retiree health accounts are emerging as tools to bridge gaps in coverage. Retirees are advised to stay informed about policy changes while planning conservatively for out-of-pocket costs.

Medicare may cover many medical expenses, but not all. Planning for supplemental insurance and long-term care is essential. Long-term care insurance, health savings accounts (HSAs), and hybrid life insurance policies with care riders can offer additional support.

Reality Check: Unexpected medical costs can derail even the best investment strategy if not planned for in advance.

How to Reassess Your Allocation

Retirement planning is not a one-time event. Experts recommend an annual review of portfolio allocations, income needs, and market trends. The following checklist can help:

• Evaluate risk tolerance annually
• Rebalance your portfolio at least once a year
• Review spending and withdrawals in light of inflation and market performance
• Update healthcare and insurance plans based on changing needs

Financial Advisors Urge Proactive Planning

The overarching message from financial planners is clear: retirees must take an active role in managing their investment portfolios. With uncertain markets and increasing lifespans, assumptions made at retirement age may not hold a decade later.

Technology is playing a growing role in this process. Robo-advisors now offer "retirement guardrail" algorithms that automatically adjust portfolios and withdrawals, while telehealth services are helping retirees manage healthcare costs more efficiently. These tools, while no substitute for human advice, can provide additional layers of security.

“Retirement used to be the finish line. Now it’s just another phase of financial planning,” says David Blanchett, managing director at PGIM. “Flexibility and adaptability are the new pillars of successful retirement.”

As retirement dynamics shift, these four questions provide a foundation for smarter, safer investment decisions. Regular check-ins with financial advisors, thoughtful diversification, and awareness of both market and personal changes can help retirees protect and grow their wealth—throughout what may be the longest chapter of their lives.