Is it Possible to Invest to Safely in Retirement ft. Colin Overweg, CFP®

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The Hidden Risks of Being Too Conservative

Inflation Risk

Investing too conservatively, like holding primarily cash and bonds, leaves your portfolio trailing behind rising costs as inflation steadily reduces how far your retirement income will stretch. Over decades, cash and bonds often fail to keep pace with inflation. 

"The real risk isn't short-term market swings, it's running out of money in your 80s or 90s because your portfolio didn't keep pace with inflation," said Overweg.

Overweg also said that he recommends allocations based on his client's needs: "Every plan is unique, but a reasonable framework is to keep one to two years of expected income withdrawals in cash, an additional five years of withdrawals in bonds for stability, and the rest in a globally diversified stock portfolio. This gives your stocks at least an eight-year timeline, which really starts to put the odds of success in your favor."

Regardless of what the numbers say, Overweg reminded us, "Numbers don’t tell the whole story—feelings do. Two clients might both have an 85% chance of success, but if one feels they’re just scraping by while the other feels comfortable, their plans will require very different approaches."

Ultimately, both advisors agreed that when it comes to balancing safety with growth for retirees. 

"A good advisor asks great questions, clarifies and quantifies the client’s goals, and builds a comprehensive portfolio to meet those needs," said Overweg.