Why Retirement Risk Management Must Be Personalized
Ryan Kittredge, ClearPath Financial Partners, discusses how individuals approaching retirement should assess and manage investment risk within their portfolios. He looks at the subjective nature of risk, emphasizing volatility and the importance of diversification. Kittredge highlights a recent trend of pre-retirees being more heavily invested in stocks than in the past, often due to market performance drift and chasing past returns. He advocated for a contrarian approach—increasing stock exposure during market downturns—and stressed that asset allocation should be highly customized to an individual’s goals, income needs, and risk tolerance, rather than following simple age-based rules. “We have clients that have only 30% in stocks. We have ones that have 90% in stocks and it’s equally appropriate, but clearly different based on those income sources, their willingness and ability to accept risk and a million other factors.”
An individual’s optimal asset allocation was not a one-size-fits-all formula. It depended heavily on specific factors like other income sources (pensions, Social Security), withdrawal needs, and personal willingness to withstand market fluctuations.
For some early retirees, it was appropriate to be more conservative in the years just before and after retiring, and then increase stock exposure later once other income sources like Social Security began.