Investment Risk Explained — and 3 Ways to Make Sure You’re Properly Aligned

Article Overview

1. What Is Investment Risk?
2. Why Risk Alignment Matters in Retirement
3. Three Ways to Make Sure You’re Aligned With the Right Level of Investment Risk
   1. Know Your Personal Risk Tolerance
   2. Match Investments to Your Time Horizon
   3. Use Riskalyze® to Find Your Risk Number®
4. Final Thoughts

If you’re already retired or planning to retire within the next five years, chances are you’ve thought about investment risk, even if you didn’t even realize it. 

Here are some thoughts that tie directly into investment risk: 

• “Will I run out of money in retirement?”
• “Should I wait to retire until things get less volatile?” 
• “Do I need to change my mix of stocks and bonds in my 401(k) portfolio?” 

But what exactly is investment risk? And how do you know if the risk in your portfolio matches your comfort level and financial goals?

In this piece, we’ll explain what investment risk means in retirement and share three ways to make sure your investments are properly aligned with your needs—so you can move forward with clarity and confidence.

What Is Investment Risk?

At its core, investment risk is the possibility that your money won’t grow as expected. Or worse, that you’ll lose money at the wrong time.

In your working years, you had time to recover from downturns. That’s tied to the idea of time horizon that you may hear quite a bit from investment professionals. The retirement destination is still well down the road. 

But in retirement, that margin for error is smaller. Your time horizon is minimal. You’ve arrived at the destination, and you may be actively taking money from retirement accounts. That’s why it’s critical to understand how much risk you’re taking—and whether it still fits your life.

Why Risk Alignment Matters in Retirement

When you retire, your investment focus shifts from growth to income and preservation. A portfolio that may have worked for you at 45 might not make sense at 65.

Here’s why proper risk alignment matters:

• It helps protect your income stream in retirement
• It reduces the chance of large losses early in retirement (known as sequence of returns risk)
• It lets you sleep better at night, knowing your money is positioned intentionally

3 Ways to Make Sure You’re Aligned With the Right Level of Investment Risk

Whether you’re already retired or just a few years away, these three steps can help ensure your portfolio is truly working for you—not against you.

1. Know Your Personal Risk Tolerance

Your tolerance for risk is about more than just numbers—it’s about your feelings.

• How did you feel during the last market drop?
• Would a 10% decline in your investments cause stress—or would you see it as an opportunity?
• Are you more focused now on protecting what you’ve built or continuing to grow?

Your answers help shape an investment strategy that fits your lifestyle and peace of mind.

2. Match Investments to Your Time Horizon

Not all retirement money is created equal. Some funds you’ll need soon. Others can stay invested longer.

That’s why financial advisors like our team at Pleasant Wealth often recommend a “bucket strategy”:

• Bucket 1: Funds you’ll use in the next 1–3 years (kept very safe)
• Bucket 2: Money needed in 3–10 years (moderately invested)
• Bucket 3: Long-term money (can handle more risk and growth)

By organizing your assets this way, you’re less likely to feel forced into selling investments during market dips—especially when income is needed.

3. Use Riskalyze® to Find Your Risk Number®

One of the most effective tools we use with clients is Riskalyze®, a technology that puts real numbers behind your investment risk.

Here’s how it works:

• You answer a short series of easy, scenario-based questions. 
• Riskalyze® generates your personalized Risk Number®, on a scale from 1 to 99, with 1 being “keep money under the mattress” risk, and 99 being the “up for anything” level of risk. 
• We then compare that number to your current portfolio to see if you’re properly aligned.

The result? You get a clear, visual understanding of whether your investments match your comfort level and retirement goals.

Important Note: Riskalyze® is only available through licensed financial professionals. You won’t find it on a public website or app. But we offer it as part of my retirement planning process.

Final Thoughts

Understanding and managing investment risk is one of the most important steps you can take for a confident retirement. And the right level of risk isn’t about being ultra-conservative or ultra-aggressive. It’s about balance and alignment.

If you’re wondering whether your current investment strategy is still right for where you are in life, I’d be happy to help. Our team focuses on serving women who are already retired or within five years of retirement feel good about their money. 

Ready to Feel Good About Your Money? 

Let’s schedule a quick, no-pressure conversation. We’ll help you better understand how we help our clients here at Pleasant Wealth and answer any questions you have about partnering with a financial advisor to see if we’d be a good fit. 

Ways to get in touch: 

• Call: (330) 893-0113
• Email: info@pleasantwealth.com
• Book an appointment directly