How should a retirement portfolio be structured?


The first step is to take advantage of tax-favored retirement savings tools. Employees can consider taking full advantage of a 401(k) or other employer-sponsored plan at work. Based on his or her particular set of circumstances and goals, an employee can consider opening an individual retirement account (IRA) and contributing as much as possible. Investing in both an employer plan and an IRA can be ideal.

Contributions to employer plans like 401(k)s are typically made on a pretax basis, but plans may also allow after-tax Roth contributions. Pre-tax contributions reduce current taxable income, but those contributions, and any investment earnings, are subject to federal income tax when withdrawing them from the plan. Roth contributions, on the other hand, have no up-front tax benefit. But contributions are always tax free when distributed from the plan, and any investment earnings are also tax free if a distribution is qualified. Similarly, IRAs allow a choice of either tax-deductible contributions (traditional IRA) or tax-free withdrawals (Roth IRA). Plus, funds held in an employer plan or IRA grow tax deferred. These tax features may make it possible to accumulate a sizable retirement fund, depending on how well the underlying investments perform.

With that in mind, employees might consider aiming for long-term investment returns and steady growth. Many financial professionals suggest a balanced portfolio of varied investments and cash equivalents. The percentage of each will depend on risk tolerance, age, liquidity needs, and other factors. However, the notion is fading that one should change their investment allocations and convert their entire portfolio to fixed income securities, such as bonds or CDs, by the time they retire. Instead, many professionals discuss continuing to invest for long-term growth even after retirement as a consideration - especially since people are retiring younger and living longer on average. Personal circumstances will dictate the right mix of investments, and a qualified financial professional can help make the right choices.

Important Note: Equitable believes that education is a key step toward addressing your financial goals, and this discussion serves simply as an informational and educational resource.  It does not constitute investment advice, nor does it make a direct or indirect recommendation of any particular product or of the appropriateness of any particular investment-related option. Your unique needs, goals and circumstances require the individualized attention of your financial professional.

Information provided has been prepared from sources and data we believe to be accurate, but we make no representation as to its accuracy or completeness. Data and information is not intended for solicitation or trading purposes. Please consult your tax and legal advisors regarding your individual situation. Neither Equitable nor any of the data provided by Equitable or its content providers, such as Broadridge Investor Communication Solutions, Inc., shall be liable for any errors or delays in the content, or for the actions taken in reliance therein. By accessing the Equitable website, a user agrees to abide by the terms and conditions of the site including not redistributing the information found therein.

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GE-4179114.1 (01/2022) (Exp. 01/2024)