How to Guard Your Roseville Retirement in Volatile Markets

The recent surge in AI and technology stocks has driven strong market returns but also increased concentration risk. If you’re nearing retirement, relying heavily on a small group of high-performing stocks may expose your portfolio to sharp declines if market sentiment shifts.

Over the past couple of years, a relatively small group of technology and AI-driven companies has fueled much of the market’s growth. That raises a fair question: What happens if that momentum slows or if there is a major sell-off driven by profiteering?

If you plan to retire in California, this isn’t just a theoretical concern. If your portfolio has become heavily tilted toward a small number of sectors or high P/E stocks, your exposure to a potential downturn may be greater than you realize.

From a planning standpoint, this is where stress-testing your portfolio becomes more important. Instead of assuming current trends will continue forever, it may help to look at how your investments would behave under different scenarios, including:

• A pullback in tech valuations
• Rising interest rates affecting growth stocks
• A broader market rotation into other economic sectors
  

Shawn McElmoyl puts it this way:

“The biggest risk we see isn’t always what’s obvious. It’s when investors unknowingly become overexposed to what’s been working recently.”

The purpose isn’t to avoid growth, but to understand how much of your future depends on it.

A concentrated portfolio can increase both volatility and downside risk, which should be a major concern, especially if you’re near retirement. Diversification across sectors, asset classes, and income sources may help reduce reliance on a single market outcome.

You more than likely didn’t intentionally build your portfolio to be highly concentrated, but it happens when the markets favor particular securities or sectors of the economy.

A few higher-performing stocks grow to represent a larger percentage of your portfolio. Employer stock, tech exposure, or healthcare holdings can quietly shift your allocation to concentrated positions.

The issue is not just transitioning from asset accumulation to preservation of capital and the production of income. It is about achieving long-term financial security with a comfortable lifestyle.

When you’re decades away from retirement, concentration risk may be easier to tolerate - you have the time you need to recover. But as you get closer to retirement, there should be a natural transition to a more conservative investment strategy that has a lower risk profile.

Here are some recommended ways to evaluate and address concentration risk:

• Reviewing position sizes relative to your total portfolio
• Looking at economic sectors as well as individual securities
• Gradually rebalancing to reduce overexposure
• Incorporating more income-producing investments to offset volatility
• Coordinating investment sales with tax planning strategies
  

This is where working with a financial advisor in Roseville, California, may be helpful. It’s not about eliminating risk. It’s about understanding where it exists and how it could affect your retirement plans and timelines.

Gold and other precious metals are often used as diversification tools because they may behave differently from stocks during periods of market volatility. Including some non-correlated assets can help balance portfolio volatility.

Non-correlated example: A period of high inflation can cause stocks to decline, whereas gold can actually increase in value.

With increased market uncertainty, more investors are revisiting the role of gold and other precious metals in their portfolios.

This isn’t new; gold has historically been viewed as a hedge during periods of inflation, currency concerns, geopolitical tensions, or market instability. The need for increased stability is increasingly important as you near retirement.

The key question isn’t whether gold is “better” than stocks. It’s how it fits within a broader asset allocation to pursue a more diversified result.

From a portfolio perspective:

• Stocks aim to provide long-term growth potential
• Gold may act as a counterbalance during certain market conditions
• Cash and fixed income can provide liquidity and income
  

The idea is to build a mix of assets that don’t all move in the same direction at the same time.

“Diversification isn’t about picking winners. It’s about building a portfolio that doesn’t rely on one outcome.”

~Shawn McElmoyl 

That distinction matters, especially as retirement approaches and preservation of capital becomes more important.

Stock market alternatives, such as bonds, real estate, structured products, and income-focused investments, may offer diversification and income potential that help retirees minimize risk while retaining some upside. This is even more important during a period of rising longevity.

As retirement gets closer, many investors start asking different questions, for example:

How do I generate income without relying entirely on the securities markets?

This is where alternative investment strategies may come into play. Depending on your situation, these could include:

• Fixed-income investments, such as bonds, ETFs, or bond funds
• Real estate exposure, either direct or through REITs
• Structured investments designed to balance risk and return
• Dividend-focused portfolios aimed at producing income
  

Each option comes with its own trade-offs. Some may offer more stability but lower returns. Others may provide income but come with liquidity constraints or other complexities.

From a retirement planning perspective in Roseville, CA, the focus is often on building multiple income streams rather than relying on a single source.

This is similar to building multiple wells rather than relying on a single water source. If one dries up or slows down, the others can help fill the gap.

The goal is to create flexibility, especially in years when the markets are in prolonged declines.

Why not just focus on income production, for example, an all-fixed-income strategy? Then you spend the income to support your lifestyle. That may be short-sighted. For example, another concern is producing higher returns to offset inflation. An inflation rate of 2-4% can erode the purchasing power of your money over the long term.

Retirees in California often face added tax pressure, including state income taxes on retirement distributions. Tax-driven strategies, such as Roth conversions, tax-efficient withdrawal planning, and proper asset location, can help limit the amount of your income subject to various types of taxes.

Taxes don’t stop in retirement; in many cases, they become more complex.

California, in particular, adds another layer. For example, while Social Security may be treated differently, many retirement distributions are still subject to state income tax.

Some planning strategies that may be worth exploring include:

• Roth IRA conversions during lower-income years
• Coordinating withdrawals across taxable, tax-deferred, and tax-free accounts
• Using tax-efficient investments in brokerage accounts
• Timing income events to avoid pushing you into higher tax brackets
  

The key here is coordination.

Taking withdrawals without a plan can lead to unintended consequences such as higher taxes, increased Medicare premiums, or reduced flexibility later in life. The conversation often comes back to timing and sequencing. When you take income can matter just as much as how much you take.

Long-term care costs in California can be significant, and planning ahead may help reduce the financial impact for one or both spouses. Options include insurance, asset allocation strategies, and dedicated funding approaches.

Long-term care planning is one of the most overlooked aspects of retirement planning, and one of the most expensive if not addressed properly. In California, the cost of care can add up quickly, whether it’s in-home assistance, assisted living, skilled nursing, or memory care. The challenge is that these costs are unpredictable and already run into thousands of dollars per month.

From a planning standpoint, there are a few ways to approach this:

• Long-term care insurance, where available and when appropriate
• Hybrid policies that combine life insurance with care benefits
• Self-funding strategies, using designated assets
• Portfolio adjustments to account for potential future expenses
• Increased risk in early retirement to produce higher returns
  

This isn’t just about covering costs. It’s about preserving flexibility and reducing the financial strain on both spouses and other family members. 

“Long-term care isn’t just a financial issue; it’s a family issue. Planning ahead can make a difficult situation more manageable.”

~Shawn McElmoyl

If you plan to retire in California, where living expenses are higher than the national average, this may be an area worth evaluating sooner rather than later.

If you need assistance building a retirement plan or would like to review your existing plan with our team, schedule an appointment.