What Should My Retirement Portfolio Look Like? The Process of Evaluating Your Retirement Portfolio

The shift that’s occurred over the past few decades – from employer-sponsored pension plans where a retiree had very little input on how that pension operated to individually managed accounts such as IRAs and 401(k)s – has given individual investors more power in deciding how much they want to save for retirement and how their retirement funds are invested.

But along with this control has come a much greater responsibility. We’re not guaranteed any level of income when we retire, and even if we manage to accumulate a large account balance we’ve got to be confident that we’re investing properly. You might wonder: what should my retirement portfolio look like? Here are some tips for evaluating your retirement portfolio.

Consider All of Your Retirement Accounts and Assets Together. One mistake that some investors make is to evaluate each of their various accounts in isolation from one another. In other words, a person might look at one of their accounts and decide that it is dangerously overweighted in a particular asset class, and take steps to change their investments to a different mix. But a highly focused account shouldn’t necessarily be alarming if that person’s overall retirement portfolio is properly diversified.

For example, you may wish to use your self-directed IRA to invest in a single piece of real estate. On its face, this is not at all diversified. But if you have multiple other retirement accounts, then your overall retirement portfolio could very well be diversified in whatever way you see fit.

You need to have some idea of how you are evaluating your accounts before you do the actual analysis. Are you looking at the underlying volatility of the assets? Are you analyzing how much current income is generated? The criteria by which you evaluate a retirement account will vary depending on your needs. One common way to evaluate your portfolio will be to look to whether your investments are properly diversified.

But even with an eye towards diversification there is no single best investment model you’ll automatically use. For example, you may wish to evaluate your account on the basis of its overall performance over the past few years, how much income it’s currently generating, and how it compares to hypothetical portfolios or other broad market benchmarks.

Even within the realm of just your retirement accounts, you may have different goals. For example, in a self-directed Roth IRA, you may wish to make your more aggressive investments in that account (because your eventual withdrawals will be tax-free), while you may decide to use a traditional IRA account to invest in somewhat more predictable, perhaps income generating investments. Furthermore, if you intend to use one of your IRAs as an estate planning tool, then you may have particular investment goals and targets that are otherwise outside of your overall retirement portfolio planning.

If you have an IRA, the first place to go for guidance when you begin evaluating your retirement portfolio is your custodian.

Quest Trust Company helps change people’s lives and financial future through self-directed IRA investment education. Quest Trust Company helps people invest in what they know best and build their financial future on their own terms.