7 Types of Model Portfolios for Retirees to Consider

As retirees embark on the next chapter of their financial journey, understanding the various types of model portfolios available becomes crucial. These portfolios align with the unique needs and goals of retirees, offering a structured approach to managing investments during retirement. With the right model portfolio, retirees can balance the need for income, growth and risk management. This helps ensure financial security in the years to come. From conservative options prioritizing capital preservation to more balanced approaches seeking moderate growth, these diverse choices can cater to different risk tolerances and financial objectives.

For help balancing your portfolio, consult a financial advisor who can analyze your investments and recommend a strategy moving forward.

What Is a Model Portfolio?

A model portfolio is a pre-constructed collection of investments designed to achieve specific financial goals while adhering to a particular risk tolerance. ¹ Typically crafted by financial experts, these portfolios serve as a blueprint for investors looking to streamline their investment strategy.

By following a model portfolio, investors can benefit from a diversified asset mix. This may include stocks, bonds and other securities, all tailored to meet their financial objectives.

One of the primary advantages of using a model portfolio is the ease of implementation. Investors, especially those who may not have the time or expertise to actively manage their investments, can rely on these professionally designed portfolios to guide their investment decisions.

This approach not only saves time but also reduces the emotional stress often associated with market fluctuations. Additionally, model portfolios offer diversification that can help mitigate risk, as they typically contain a variety of asset classes and sectors.

Types of Model Portfolios for Retirees

There are different types of model portfolios. Understanding how each works will help you select the one that aligns with your financial goals, risk tolerance and retirement income requirements.

Conservative Income

This portfolio typically allocates about 60-70% of its assets to fixed-income investments, such as bonds. It splits the remainder between equities and cash or other liquid assets.

This limited exposure to stocks can help protect against market volatility, making it an attractive option for older retirees who prioritize stability and predictable income.

Balanced Income and Growth

This portfolio generally distributes 40-50% of its assets to equities and 40-50% to bonds. It leaves a small allocation for other asset classes.

This portfolio is suitable for retirees in their 60s or early 70s who still seek moderate growth but also need income. The balance between growth and stability maintains purchasing power without excessive risk.

Growth-Oriented

This portfolio focuses on maximizing investment returns by allocating a higher percentage of assets to stocks than to bonds and cash.

This portfolio is more appropriate for younger retirees in their late 50s to early 60s who don’t want to outlive their savings. The higher stock allocation provides potential for capital appreciation, while bonds and cash offer some stability.

Retirees who can afford greater market exposure due to part-time work or pensions may prefer this portfolio.

Dividend-Focused

This portfolio tends to have around 50-60% of its assets in dividend stocks. It holds the rest in bonds and other income-generating assets for some stability.

This portfolio is a good fit for retirees in their late 60s or early 70s because dividend-paying stocks provide a regular income stream. They can use this for living expenses or reinvest for further growth. 

Inflation-Protected

This portfolio generally allocates 40-50% of its assets to inflation-hedging investments, such as TIPS bonds. It puts the rest into a mix of stocks and real assets.

This portfolio works well for retirees concerned about their purchasing power. It offers a safeguard against inflation while still allowing for some growth through equity investments.

Income Maximization

An income maximization portfolio is designed to generate monthly income. It typically allocates 40-50% of its assets to high-yield bonds or other income-producing investments, with the remainder in dividend-paying stocks and alternative assets.

Retirees seeking higher yields often choose this portfolio, though regular reviews are necessary to manage risk appropriately.

Defensive

This portfolio allocates around 50-60% of its assets to bonds and other low-risk investments. The remainder goes to defensive stocks and cash.

This portfolio is ideal for retirees of any age who are highly risk-averse and focused on capital preservation. Defensive stocks, which tend to be more stable in volatile markets, offer some exposure to equities without the higher volatility of growth-oriented investments.

How to Choose a Model Portfolio

Model portfolios are pre-constructed investment portfolios that meet specific financial goals and risk tolerances. They are crafted by financial experts and often used by investors who prefer a structured approach to investing.

Understanding the components and strategies behind these portfolios is crucial for making informed decisions. These general tips can help. 

• Assess your income needs. Those who rely heavily on their portfolio for income might lean toward conservative portfolios that prioritize income over growth. A retirement calculator can help you determine what you’ll need.
• Understanding your risk tolerance. Risk tolerance is equally important. Retirees comfortable with some level of risk may consider growth-oriented investment portfolios. These include a higher percentage of stocks that aim for long-term growth and help retirees preserve purchasing power.
• How long your portfolio must last. The best age to retire will be different for everyone. Younger retirees benefit from more exposure to equities for potential growth. Meanwhile, older retirees may want low-risk portfolios designed to generate reliable income.
• Work with a professional. A financial advisor can be instrumental in helping retirees select and access the right model portfolio. Advisors have the expertise to assess your income needs, risk tolerance and long-term goals to recommend a portfolio that aligns with your objectives.

Choosing a model portfolio requires careful consideration of your financial goals, risk tolerance and the portfolio’s historical performance. Remember, investing is a long-term endeavor, and the right model portfolio can serve as a valuable tool in building and preserving wealth over time.

How Retirement Account Rules Affect Your Portfolio Choice

RMDs

Required minimum distributions (RMDs) begin at age 73 for most retirees. ² They dictate a minimum amount you must withdraw from traditional retirement accounts each year. This amount is based on your account balance and an IRS life expectancy factor, and it increases as you age.

For example, say your portfolio is heavily weighted toward equities, and the market is down when your RMD comes due. This may force you to sell stocks at depressed prices to meet the requirement.

Taxes

The type of income your portfolio generates affects how much you owe in taxes each year.

• Bond interest and short-term capital gains are taxed as ordinary income at your marginal rate. This can reach 37% at the top bracket in 2026. ³
• Qualified dividends and long-term capital gains receive preferential rates of 0%, 15% or 20%, depending on your income. ⁴

A portfolio that produces mostly ordinary income will leave you with less after taxes than one that generates the same dollar amount through qualified dividends or long-term gains.

Medicare

Medicare premiums add another layer that many retirees overlook when choosing a portfolio.

If your modified adjusted gross income (MAGI) exceeds certain thresholds, you pay IRMAA surcharges on Medicare Part B and Part D premiums. A high-yield or income maximization portfolio that generates substantial taxable income in a single year can push you past those thresholds. That increases your Medicare costs for the following year by hundreds or even thousands of dollars.

Where you hold different types of investments across your accounts matters as much as what you hold. Bonds and other income-producing assets generate taxable interest every year in a taxable brokerage account. Placing those same holdings inside a tax-deferred IRA shields that income until withdrawal.

Growth-oriented investments producing little income are generally more tax-efficient in taxable accounts. This is where long-term gains receive more favorable treatment.

These rules mean that two retirees with identical portfolios can end up with very different after-tax income. It all depends on how their investments are distributed across account types.

A model portfolio that looks ideal on paper may be entirely different in practice if you do not consider the tax character of each account. Matching the right investments to the right accounts can meaningfully increase the amount of income that actually reaches your bank account each month.

How to Determine Which Model Portfolio Matches Your Retirement Income Gap

Step 1. Add Essential Expenses

Start by adding up your essential annual expenses, including these.

• Housing
• Food
• Healthcare
• Insurance
• Transportation
• Any recurring obligations

This is the baseline amount your finances need to cover each year, regardless of what the market does.

Be realistic about this number. Include expenses that are easy to underestimate, like out-of-pocket medical costs and home maintenance.

Step 2. Subtract Guaranteed Income Sources

Subtract your guaranteed income sources from that total. Social Security, any pension and annuity income all count as guaranteed because they arrive regardless of market performance.

The difference between your essential expenses and your guaranteed income is your retirement income gap. This is the amount your investment portfolio needs to produce each year.

3. Divide for the Required Withdrawal Rate

Divide that annual gap by your total portfolio value to find your required withdrawal rate.

If you need $40,000 per year from a $1 million portfolio, your withdrawal rate is 4%. If you need $60,000 from the same portfolio, your rate is 6%.

The difference is critical to consider.

• High withdrawal rate. The higher the withdrawal rate, the more pressure on your portfolio and the less room you have for aggressive growth allocations that could experience significant short-term declines. A higher withdrawal rate suggests a conservative, income- or dividend-focused portfolio prioritizing reliable cash over long-term appreciation.
• Lower withdrawal rate. A lower withdrawal rate gives you more flexibility in choosing a model portfolio. If your guaranteed income covers most of your expenses and your portfolio only needs to produce 2% to 3% annually, you can afford a growth-oriented or balanced allocation because you are not relying on the portfolio for immediate cash flow.

Your time horizon determines how much growth exposure the portfolio needs to sustain withdrawals without running out. A retiree at 62 who expects to need income for 30 years needs more equity exposure than a retiree at 78 planning for 15 years.

To help, run a projection that shows your portfolio balance over time. Use your planned withdrawal rate and expected return. This can reveal whether the model portfolio you are considering can actually support your spending for your estimated time horizon.

Bottom Line

Understanding the types of model portfolios available can help retirees align their investments with their financial goals and risk tolerance. A conservative portfolio is often popular with retirees. It typically emphasizes income generation and capital preservation, focusing on bonds and dividend-paying stocks. This approach can provide a steady income stream while minimizing exposure to market volatility. Ultimately, the choice of a model portfolio should reflect individual financial needs, lifestyle aspirations and risk preferences.

Tips for Retirement Planning

• A financial advisor can help you create a retirement plan based on your needs and goals. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
• Creating a reliable and adequate income stream from investments is one of the main goals of retirement planning. Here are four general investment options to consider.

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