With stocks near record levels and Treasury yields above 5% across much of the longer-term curve, retirees face an unusual question: Where should the next dollar go?

By Tony Gomes, Founder & CEO, Advanced Wealth Management | Boutique Family Office™

For years, investors operated in an environment where interest rates were so low that there were few attractive alternatives to stocks for generating meaningful returns. Today, that landscape looks very different.

The Nasdaq reached another record high this week, fueled in part by enthusiasm surrounding artificial intelligence and expectations for strong corporate earnings, while the S&P 500 remains near its previous high. At the same time, bonds are offering yields many retirees have not seen in years. As of October 2, the 2-year U.S. Treasury yielded approximately 4.83%, the 5-year 5.06%, the 10-year 5.28% and the 30-year 5.63%.

For retirees, that creates a very different planning environment. Attractive stock-market returns no longer exist alongside near-zero yields on safer assets. Investors now have meaningful choices across stocks, bonds and cash.

Rather than asking which one is “best,” we believe the more useful question is: What does this money need to accomplish, and when will it be needed?

Don’t Make One Investment Decision for Your Entire Retirement

One of the biggest mistakes in retirement planning is treating an entire portfolio as though every dollar has the same purpose. Money needed for living expenses next year should not necessarily be invested the same way as money intended to support retirement 15 years from now. Assets that may eventually pass to children, grandchildren or charities can have an even longer time horizon.

Our Boutique Family Office™ planning process addresses those different needs through the SWAG Retirement Roadmap™. Instead of making one broad decision about whether stocks, bonds or cash are more attractive today, we consider how each portion of a family’s wealth fits within the overall retirement plan.

Income Now: Protect the Money You’ll Need Soon

For retirees, the first priority is maintaining sufficient liquidity to support current lifestyle needs. That can include housing, healthcare, travel, taxes and ordinary monthly spending.

Today’s interest-rate environment makes this part of the portfolio more attractive than it has been for much of the past decade. Treasury bills and other high-quality short-term fixed-income investments can generate meaningful income while maintaining relatively high liquidity.

This portion of the plan is not designed to chase the highest possible return. It is there to help fund near-term spending without forcing the sale of long-term investments during an unfavorable market. That separation can be particularly valuable when markets become volatile.

Income Later: Today’s Yields Deserve Another Look

The next portion of the retirement plan addresses money that may be needed several years from now, and today’s bond market presents opportunities that simply were not available during the long period of near-zero interest rates.

With the 5-year Treasury recently yielding just over 5% and the 10-year Treasury around 5.3%, investors can once again earn meaningful income from high-quality fixed-income securities. For retirees who spent much of the previous decade earning considerably less from bonds, those yields deserve attention.

One strategy is to construct a bond ladder using securities with different maturity dates. Spreading maturities over several years can reduce the need to make one large bet on the direction of interest rates. If rates rise, proceeds from maturing bonds can be reinvested at higher yields. If rates decline, some of today’s higher yields may already be locked in for longer periods.

Rather than trying to predict the Federal Reserve’s next move, the focus is on creating a dependable source of future income and aligning that income with the years in which the money is expected to be needed.

Growth: Record Highs Don’t Automatically Mean It’s Time to Sell

Stocks trading near record levels understandably make some retirees uneasy, but a market reaching a new high does not tell us what will happen next. The more important consideration is whether the portfolio’s growth allocation remains appropriate for long-term objectives, future spending needs and tolerance for risk.

One area worth reviewing today is concentration. AI-related companies have been an important driver of recent market gains, and strong performance among a relatively small group of large companies can gradually change the composition of an otherwise diversified portfolio. An allocation that was appropriate several years ago may now carry much greater exposure to technology or a handful of individual companies simply because those investments appreciated faster than everything else.

That does not automatically mean successful investments should be sold. It does mean investors should periodically review whether the amount and type of risk in the portfolio still match the plan.

Long-term growth also remains important for assets that may not be needed for 10, 15 or 20 years. Higher bond yields do not eliminate inflation, rising healthcare costs or the possibility of a retirement lasting several decades. A well-designed retirement strategy still needs sufficient growth potential to address those longer-term risks.

Legacy: Your Longest-Term Money Has a Different Job

Some families have assets they are unlikely to spend during their lifetimes. Those dollars may eventually support children, grandchildren, charitable organizations or other legacy objectives.

When the investment horizon extends for decades—or potentially across generations—short-term movements in interest rates become much less important. Investment strategy can instead be coordinated with estate planning, tax management and charitable planning to determine how wealth can be preserved, transferred and ultimately used according to the family’s intentions.

This is where viewing the entire family balance sheet becomes particularly valuable. Decisions about long-term investments should not be made independently from decisions about taxes, estate structures, charitable giving and the eventual transfer of wealth.

The Bigger Opportunity May Be Coordination

What makes today’s market particularly interesting is that investors have attractive choices across several parts of the portfolio. Stocks remain near record levels, high-quality bonds are producing meaningful income, and cash is earning considerably more than it did during the years of near-zero interest rates.

That is good news for retirees, but more choices make coordination more important—not less.

Rather than deciding whether an entire retirement portfolio should favor stocks or bonds, a better starting point is determining how much is needed for near-term spending, how much should provide income later in retirement, how much can remain invested for long-term growth and how much may ultimately support legacy goals.

Once those needs are defined, investment decisions become more purposeful and less dependent on predicting the next move in the markets.

What We Are Reviewing With Families Now

This environment provides a good opportunity to review how the different parts of a retirement strategy are working together.

For near-term spending, we are looking at whether families have sufficient liquidity without holding unnecessary amounts of cash in accounts earning substantially below current market rates. For future income needs, today’s higher Treasury and fixed-income yields may offer opportunities to strengthen the income portion of the retirement plan.

On the growth side, we are reviewing whether the recent stock-market rally has caused equity, technology or individual-company exposure to become larger than originally intended. Just as important, we are looking beyond the portfolio to determine whether investment decisions, withdrawals, taxes and estate strategies are being coordinated rather than managed independently.

Those issues are likely to matter far more to a family’s long-term retirement outcome than correctly predicting what the Federal Reserve will do at its next meeting.

A Good Retirement Plan Shouldn’t Depend on One Market Forecast

Markets will change. Interest rates will change. The investments leading today’s market will not lead forever. A retirement lasting 20 or 30 years will experience many different economic and market environments along the way.

A sound retirement strategy therefore should not depend on getting the next forecast right.

Through our SWAG Retirement Roadmap™, we organize wealth around four distinct time horizons: Income Now for current and near-term spending, Income Later for future retirement income, Growth for long-term appreciation and longevity, and Legacy for wealth intended for future generations and causes that matter to the family.

With stocks near record highs and bond yields at levels investors haven’t seen in years, retirees do not necessarily have to choose one market over another. Today’s environment may instead provide an opportunity to strengthen the overall retirement plan by making sure each part of the portfolio is aligned with when the money will be needed and what it is ultimately intended to accomplish.

Avoid the Investment Mistakes That Can Derail Your Retirement

With stocks near record highs and bonds offering meaningful income again, retirees have more attractive choices—but that doesn’t necessarily make investing easier.

Our complimentary guide, 13 Retirement Investment Blunders to Avoid, explores common mistakes involving market timing, inflation, diversification, retirement withdrawals, taxes, and sequence-of-returns risk. It also shows how to think about your wealth across Income Now, Income Later, Growth, and Legacy. 13-retirement-investment-blunde…

The goal isn’t to predict what markets will do next. It’s to build a retirement strategy designed to work through changing markets.

Download the Free Guide →