Personal FinanceCanva | perfectwave and Tatiana MaksimovaMarc GubertiIt’s normal to confront several questions about constructing a retirement portfolio and deciding how much you need to withdraw. No matter how large your portfolio becomes, you’ll want to make it larger.That brings us to a Reddit post from a user with a $25 million portfolio. The user uses a 3% withdrawal rate but wants clarification on the withdrawal percentage and how to diversify their holdings. The user believes it is risky to have less than 90% of your portfolio invested in equities due to inflation.I will share my opinion in this post, but it is always good to work with a qualified financial advisor who can offer personalized advice.
Investing in assets like stocks and real estate will help you outperform inflation and protect your nest egg.
The withdrawal rate depends on several factors, such as your portfolio’s size and living expenses.
Retiring early is possible, and may be easier than you think. Click here now to see if you’re ahead, or behind. (Sponsor)
Is a 3% Withdrawal Rate Too Low?PKpix / iStock via Getty ImagesThe optimal withdrawal rate factors in your living costs, financial goals, and other details. A 3% withdrawal rate may not be enough to cover living expenses if you have a $100,000 retirement account. Building it up should be a priority in that scenario.However, the Redditor with a 3% withdrawal rate also has a $25 million portfolio. This withdrawal rate adds up to $750,000 per year. That’s enough for most people to live on, and the Redditor isn’t asking about how to juggle their living expenses.Stocks can reclaim that 3% return quite easily in bull markets. Even bonds and CDs can generate returns above 3.00% APY. Is 100% Equities the Right MoveRORONOR / Shutterstock.comThe Redditor’s question centers around whether they should invest 100% into equities or diversify their holdings. While equities allow people to grow their wealth faster than fixed-income assets, the main objective for high-net-worth individuals is to stay rich.With a $25 million portfolio, it’s not necessary to take big risks. Sure, it would be nice to go from a $25 million portfolioto a $50 million portfolio. However, pursuing that route risks the portfolio going down to $5 million, and it’s not worth it. As a portfolio gets larger, every extra dollar has less of an impact on a person’s life. Wealth preservation becomes the main objective, and that’s when fixed income can help.Fixed income has less upside than stocks, but still presents stable upside. Allocating some money into fixed income over time can reduce your portfolio’s volatility during stock market corrections. Many investors put more capital into fixed-income assets as t