How to Structure Your Investments for Retirement

When most people think about investing, they think about which fund to pick or which investment will perform best.

But in reality, long-term investment success is driven far more by how your investments are structured than by any individual fund or stock.

In this episode of Retire Well, we explore how to build the right investment structure for retirement — and why getting the foundations right matters more than chasing performance.

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The Building Blocks of Investing

Every pension or investment portfolio is built using a combination of core asset classes:

• Equities (Shares) – The long-term growth engine. Higher potential returns, but more volatility.
• Bonds (Fixed Income) – Loans to governments or companies. Typically lower risk and provide stability and income.
• Cash – Provides liquidity and short-term security, but limited growth.
• Alternatives – Assets such as property or infrastructure that can help diversify and reduce risk.

Most portfolios blend these together. A common example is a 60/40 portfolio — 60% equities for growth and 40% bonds for stability.

Research consistently shows that asset allocation drives the majority of long-term returns, often far more than the individual funds chosen.

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Risk vs Reward

Higher returns typically come with higher volatility.

• Equities historically deliver stronger long-term growth but fluctuate more.
• Bonds reduce volatility but offer lower long-term returns.
• Cash provides stability but often loses value to inflation over time.

The key is not avoiding risk, but ensuring risk matches your time horizon and financial goals.

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How Risk Changes Over Time

Early Years – Accumulation Phase

• Long time horizon
• Regular contributions
• Market falls can be beneficial (buying at lower prices)
• Growth is the priority

For younger investors, risk is often your friend.

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Pre-Retirement (5–15 Years Before Retirement)

• Portfolio value is larger, losses feel more significant
• Less time to recover from market downturns
• Risk tolerance often begins to fall
• Shift from pure growth to a more balanced approach

However, remember: you are not withdrawing the entire pension at retirement — much of it still has decades to grow.

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Retirement – Decumulation Phase

• Sequence of returns risk becomes important
• Market falls early in retirement can have lasting impact
• A balance of stability and growth becomes essential

Importantly, retirement investing is not risk-free investing. Most retirees still need growth to maintain income and beat inflation over a long retirement.

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Lifestyle Funds

Many workplace pensions use lifestyle strategies, which automatically reduce risk as retirement approaches.

While simple and suitable for many, they are not always tailored to individual retirement plans — particularly since pension freedoms changed how people access pensions.

Understanding whether your lifestyle strategy matches your retirement plan is essential.

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Passive vs Active Investing

Another key decision is how investments are managed.

• Passive investing tracks the market and aims to match market returns at lower cost.
• Active investing involves a fund manager selecting investments with the aim of outperforming the market.

Both approaches have advantages. Passive is typically cheaper, while active may offer risk management and potential outperformance. In practice, many portfolios use a blend of both, depending on the objective.

The Bucketing Strategy

One powerful way to structure retirement investments is through bucketing.

This divides assets based on when the money is needed:

• ‍Bucket 1 – Short Term (0–3 years spending)
  
  • Cash and liquid savings for immediate needs.
• ‍Bucket 2 – Medium Term (3–7 years)
  
  • Bonds and defensive assets for stability and moderate growth.
• ‍Bucket 3 – Long Term (7–10+ years)
  
  • Equities and growth assets to drive long-term returns.

Benefits of Bucketing

• Provides structure and clarity
• Helps manage sequence of returns risk
• Balances growth and stability
• May allow you to invest with greater confidence
• Reduces emotional decision-making during market volatility

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Listener Question

“I’m 63 and just starting drawdown. I’m worried about market falls — should I move everything to cash?”

Moving everything to cash may feel safe, but it carries its own risks:

• Cash often loses value to inflation
• Too much caution early in retirement can reduce long-term growth
• You may miss market recoveries

A more balanced approach is typically better:

• Cash for short-term spending
• Bonds and defensive assets for medium-term stability
• Growth assets to maintain income and beat inflation over the long term

Risk should be managed — not eliminated.

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Key Takeaways

• Investment success is driven by structure, not stock picking
• Asset allocation is one of the biggest drivers of long-term returns
• Risk should match your time horizon, not emotions
• Retirement portfolios still need growth
• Lifestyle strategies should align with your retirement plan
• Bucketing can help manage behaviour and sequence risk
• Retirement is long — your investment strategy must reflect that

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Next Episode

In Episode 58, we’ll explore how to choose the right tax wrappers for your investments and how structure can improve tax efficiency in retirement.

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Need Help Structuring Your Retirement Investments?

If you’d like support building a retirement investment strategy tailored to your goals, risk level, and income needs, Wealth of Advice can help.

Call 0191 384 1008 to start planning your retirement with clarity and confidence.

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