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 are designed to 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, ensuring their financial security in the years to come. From conservative options that prioritize capital preservation to more balanced approaches that seek moderate growth, the choices are diverse and cater to different risk tolerances and financial objectives.

If you need help balancing your portfolio, a financial advisor can work with you to analyze investments and manage them.

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. These portfolios are typically crafted by financial experts and are used as a blueprint for investors looking to streamline their investment strategy. By following a model portfolio, investors can benefit from a diversified mix of assets, which may include stocks, bonds, and other securities, 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 manage their investments actively, 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 a level of diversification that can help mitigate risk, as they are typically constructed with a variety of asset classes and sectors.

Types of Model Portfolios for Retirees

Retirees comparing different model portfolios.

There are different types of model portfolios. So you will need to know to select one that aligns with your specific financial goals, risk tolerance and income requirements in retirement. Here are seven general models to consider:

Conservative income: This portfolio typically allocates about 60-70% of its assets to fixed-income investments like bonds, with the remainder split between equities and cash or other liquid assets. The limited exposure to stocks could help protect against market volatility, making this option attractive 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, with 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 having a higher percentage of assets in stocks compared 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 more market exposure due to part-time work or pensions may find this portfolio particularly appealing.
Dividend-focused: This portfolio tends to have around 50-60% of its assets in dividend stocks, with 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 that can be used for living expenses or reinvested for further growth.
Inflation-protected: This portfolio generally allocates 40-50% of its assets to inflation-hedging investments, such as TIPS bonds, with the rest in a mix of stocks and real assets. This portfolio works well for retirees concerned about their purchasing power as 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, with the remainder in 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 designed to 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. Here’s a closer look at these four general tips:

Assess your income needs: Those who rely heavily on their portfolio for income might lean toward conservative portfolios that offer more stability and 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 that include a higher percentage of stocks that aim for long-term growth and help retirees preserve purchasing power.
How long you will need your portfolio need to last: The best age to retire is going to be different for everyone. Younger retirees benefit from more exposure to equities for potential growth, while 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.

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, often favored by retirees, 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.