Retirement income products
Retirement income products
Designing a portfolio for retirement income

Robert FragassoRobert Fragasso
Certified Financial Planner, chairman and CEO of Fragasso Financial Advisors in Pittsburgh.

One of the most important aspects to consider when designing any portfolio is the ability of the client to stick with the program.

"If they start to flip-flop around, listening to street corner advisers, they may find themselves being led astray and losing capital. And they cannot afford to lose capital in this scenario," Fragasso says.

After the assets have been portioned out to investments, regular rebalancing will provide opportunities to scrape off some income.

Robert Fragasso's portfolio recommendation
Robert Fragasso's portfolio recommendation

50 percent fixed income / 50 percent equities

"We always keep three months' at least, sometimes six, but we always keep three months' of income distributions in money market (funds)," Fragasso says.

"As we rebalance every quarter, we look at that reservoir of income payments and make sure it stays full. We do that when we liquidate to rebalance the portfolio," he says.

When rebalancing, investors sell portions of investments that have done well and buy more of positions that have floundered in order to bring the portfolio back in line with the original model.

It's not easy to successfully navigate a retirement income strategy, says Fragasso. Retirees should delegate this job to a trusted adviser who follows textbook financial planning.

"There are a lot of theories out there and a lot of them are untested, and some of them are going to be tested on you, the investor, maybe for the first time. You want a trusted adviser who is managing by textbook principles to guide you through this kind of a period," he says.


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