Your retirement portfolio serves as crucial financial support for an enjoyable retirement. Retirees with substantial portfolios may enjoy living off returns without touching the principal. However, those with smaller portfolios will likely need to access their funds eventually.

Seeking professional guidance on your investment objectives can offer valuable insights into the ideal frequency for rebalancing your retirement portfolio, ensuring that your asset allocation consistently aligns with your risk tolerance.

WHY REBALANCING IS IMPORTANT 
MAINTAINING YOUR DESIRED ASSET ALLOCATION

Over time, your portfolio’s asset allocation may shift due to market fluctuations. Rebalancing helps you maintain your desired allocation, ensuring that your investments align with your risk tolerance and long-term objectives.

MANAGING RISK

If left unchecked, your portfolio may become too heavily weighted in one asset class, exposing you to more risk than initially intended. Rebalancing allows you to redistribute your investments and maintain an appropriate level of risk.

OPPORTUNITY FOR REASSESSMENT 

Regularly reviewing your portfolio allows you to re-evaluate your investment strategy and adjust as needed. This can be particularly important If your financial needs and goals change during retirement.

HOW OFTEN SHOULD YOU REBALANCE 

There is no one-size-fits-all answer to this question, as the ideal frequency will depend on your circumstances and preferences. 

HOWEVER, SOME GENERAL GUIDELINES INCLUDE:

Annually: Rebalancing once a year is often sufficient for most investors. This allows you to take advantage of market performance while minimising the impact of short-term fluctuations.

Semi-annually or quarterly: Some investors may prefer to rebalance more frequently,  such as every six months or quarterly. This can provide additional opportunities to adjust your portfolio and respond to changes in the market.

TIPS FOR REBALANCING YOUR PORTFOLIO
SET TARGET THRESHOLDS

Establish specific allocation targets for each asset class in your portfolio. When an asset class’s weight deviates significantly from its target, it may be time to rebalance.

CONSIDER TRANSACTION COSTS AND TAXES 

When rebalancing, be mindful of transaction costs and potential tax implications. These can eat into your returns if not managed carefully.

REMAIN DISCIPLINED

Stick to your rebalancing plan and avoid making impulsive decisions based on market movements or emotions. A consistent approach will help you stay on track with your investment goals.

REBALANCING YOUR PORTFOLIO DURING RETIREMENT

As time progresses, your personal risk tolerance and investment objectives will evolve. Adjusting your investment portfolio with age – particularly as you enter retirement – can help align your asset allocation with your risk appetite and investment goals. It’s equally crucial to rebalance your portfolio during retirement. 

Unlike younger investors, who can weather market fluctuations, retirees aim to safeguard their capital rather than maximise returns. In retirement, your risk tolerance is likely to be significantly lower than when you were employed and received a stable income.

Want to discuss rebalancing your retirement portfolio?

Regularly rebalancing your portfolio during retirement is crucial for maintaining your desired asset allocation, managing risk and staying aligned with your financial goals. By following these guidelines, you can ensure your portfolio remains well positioned for success throughout retirement.

To discuss any of the issues raised in this article, please contact us.

Personal circumstances differ and not all of this information is applicable to every client and/or their business, this information is general in nature and should not be relied upon without seeking specific professional financial advice.

The Financial Conduct Authority (FCA) does not regulate tax advice, estate planning, trusts or will writing.

The content in this article is for your general information and use only and is not intended to address your particular requirements. Articles should not be relied upon in their entirety and shall not be deemed to be, or constitute, advice.

Although endeavours have been made to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No individual or company should act upon such information without receiving appropriate professional advice after a thorough examination of their particular situation. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of any articles.

Thresholds, percentage rates and tax legislation may change in subsequent finance acts. Levels and bases of, and reliefs from, taxation are subject to change and their value depends on the individual circumstances of the investor. The value of your investments can go down as well as up and you may get back less than you invested. Past performance is not a reliable indicator of future results.

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