​Retirement is the culmination of years of hard work, saving, and investing. But once you reach retirement age, the game changes. The strategies and approaches that served you well during the accumulation phase—when you were focused on growing your assets—are no longer sufficient. To achieve a secure, sustainable retirement, you need to redesign your portfolio to reflect your new priorities: income generation and preservation of principal.
 

Unfortunately, many retirees fail to make this critical transition. Instead, they continue using the same accumulation-phase strategies well into retirement. This can leave them overly exposed to market risk, sequence-of-returns risk, and the risk of outliving their assets. Worse, retirees often fall into the trap of working with advisors who are specialists in accumulation, not in income and preservation, further exacerbating their financial vulnerability.
 

In this article, we’ll explore why redesigning your portfolio for the income and preservation phase of life is so essential, and how to ensure you’re using the right strategies and working with the right professionals to secure your financial future.

 

The Accumulation Phase vs. The Income Phase
 

The Accumulation Phase: Growth at All Costs
 

During the accumulation phase of life—typically in your working years—you were focused on growing your wealth. Your primary goal was to save as much as possible and take advantage of the power of compound growth. To achieve this, your portfolio was likely built around higher-risk, higher-return assets like stocks and equities. The more risk you took, the higher your potential for reward.
 

For example, you may have had a portfolio that was largely weighted toward growth stocks, with little regard for the volatility or the risk of short-term losses. As a result, market fluctuations were something you could weather because you were not yet relying on that money for income. You had time on your side, and the longer-term outlook helped smooth out the bumps along the way.
 

The Income and Preservation Phase: Safety and Stability
 

When you transition into retirement, however, your priorities shift dramatically. The main goal is no longer to accumulate wealth, but to generate sustainable income from the assets you’ve built up. The focus moves away from aggressive growth to income generation, and instead of assuming more risk, the goal is to reduce that risk while preserving principal.

In this phase, you can no longer afford to take significant market risks, because you may no longer have the luxury of time to recover from losses. You also want to ensure that your portfolio provides consistent income without the volatility that could cause anxiety or disruptions to your retirement lifestyle.
 

Key shifts you need to make in your portfolio include:
 

• Reducing exposure to market risk: This doesn’t mean avoiding the market entirely, but ensuring that your portfolio is not overly reliant on growth stocks or high-volatility investments.
   

• Prioritizing principal preservation: It’s crucial to focus on investments that help protect your capital, ensuring that your money is working for you without being subject to wild swings.
   

• Income generation: You need strategies that will provide predictable, reliable income streams to cover your retirement needs, whether that’s through dividend-paying stocks, bonds, or lifetime income annuities.
   

Failing to make these adjustments could mean you end up taking on too much market risk, which increases the potential for sequence-of-returns risk—a situation where poor market returns early in retirement can drastically reduce your chances of long-term financial success.

 

Why Failing to Redesign Your Portfolio Leads to Risk
 

When retirees continue to use accumulation-phase strategies into retirement, they expose themselves to several risks that could jeopardize their financial stability:
 

1. Sequence of Returns Risk
 

This risk arises when retirees withdraw funds from their portfolios during periods of poor market performance. If your portfolio is heavily exposed to stocks, and the market crashes early in your retirement, withdrawing money from your portfolio during that time can lock in losses that are difficult, if not impossible, to recover from.
 

This risk is particularly acute when you’re relying on a growth-focused strategy. Since you’re no longer in accumulation mode, withdrawing money during a market downturn means you’re selling assets at a loss, potentially jeopardizing the long-term sustainability of your portfolio.
 

2. Excessive Market Volatility
 

During retirement, you want your portfolio to provide steady, predictable income, and the last thing you want is to be at the mercy of market swings. However, if your portfolio is still tilted toward growth investments, you are exposed to market fluctuations that could cause sudden drops in value. These drops not only threaten the growth of your portfolio but also disrupt your ability to rely on your assets for income.
 

3. Outliving Your Assets
 

When your portfolio is designed for accumulation, it’s geared toward growing wealth over the long term. But in retirement, your goal is to preserve and spend that wealth. Without the proper strategy, you risk outliving your money—a fear that many retirees face. The pressure of running out of money is real, and without a focus on income and preservation, your portfolio could run dry before you do.

 

The Problem of Using the Wrong Advisor
 

One of the most significant issues many retirees face when it comes to portfolio redesign is working with the wrong advisor. Many financial advisors specialize in the accumulation phase of life—helping clients grow their wealth. While these advisors are skilled at building portfolios that emphasize growth, they may not be equipped to guide you through the nuances of income generation and principal preservation in retirement.
 

It’s crucial to recognize that not all advisors are created equal. Just as you wouldn’t go to a dentist for heart surgery, you shouldn’t expect an advisor who specializes in accumulation to understand the specific needs of retirees looking for safe, reliable income.
 

Income and preservation specialists have expertise in the retirement phase of life. They understand the importance of reducing risk and securing lifetime income through the use of products like annuities, income-focused bonds, and other strategies that prioritize capital preservation and steady cash flow.
 

Working with the right advisor—one who specializes in the income phase of life—is essential. A good advisor will help you:
 

• Transition your portfolio from a growth-focused strategy to one that emphasizes safety, income, and preservation.
   

• Help you understand and implement strategies that will mitigate market risk and sequence of returns risk.
   

• Create a comprehensive income plan that ensures your retirement funds last as long as you do.
  
   

Using the Right Tools for the Job
 

Just as you wouldn’t use the wrong tool for a job, the same principle applies to your retirement portfolio. During the accumulation phase, your goal was growth. In the income and preservation phase, your goal is to generate reliable income while maintaining your portfolio’s value.
 

Here are some of the right tools to consider:
 

1. Annuities: Laddered income annuities can offer guaranteed, predictable income streams that are not subject to market risk, making them ideal for preserving principal while ensuring income throughout retirement.
    

2. Bonds: Treasuries, municipal bonds, or other conservative bond investments can provide reliable income and are less volatile than stocks.
    

3. Dividend-paying stocks: While stocks are still part of a balanced retirement strategy, dividend-paying stocks provide both growth potential and income, but they should be used in moderation to avoid market volatility exposure.
    

4. Cash reserves: Keep a portion of your portfolio in liquid, low-risk assets to cover short-term needs and emergencies, ensuring that you won’t have to sell investments during a market downturn.
    

By using the right combination of tools and strategies for your unique situation, you can optimize your portfolio for income and preservation rather than growth, ultimately ensuring that your money works for you throughout your retirement years.

 

Conclusion: The Importance of Redesigning Your Portfolio for Retirement
 

The transition from the accumulation phase to the income and preservation phase of life is critical. Retirees who fail to redesign their portfolios to account for their new priorities—income generation and principal preservation—put themselves at risk of running out of money, taking on unnecessary market risk, and experiencing greater volatility than they can afford.
 

To ensure a secure retirement, it’s essential to shift your investment strategy, work with an advisor who specializes in retirement income, and use the right tools for the job. By doing so, you can retire with confidence, knowing that your portfolio is designed to generate reliable income, preserve your capital, and reduce risk throughout your retirement years.
 

If you’re unsure whether your current portfolio is properly aligned with your retirement goals, consider scheduling a consultation with a retirement income specialist who can help you redesign your strategy and guide you through this important transition.