As 2025 winds down, here are some moves to help you finish the year strong financially. Morningstar’s director of personal finance and retirement planning, Christine Benz, discusses strategies.
This interview has been edited for length and clarity.
Q: What are the benefits of portfolio rebalancing, and who most needs to do it?
A: The main benefit of rebalancing is risk reduction. You trim securities that have performed really well, presumably ones with higher valuations today. And you redirect the money into securities where returns have lagged, but valuations might be more attractive. It’s also important to rebalance on an ongoing basis as you get closer to your spending target.
As retirement approaches, we need to spend that money, so you want to de-risk your portfolio and build safer asset reserves. Investors age 50 and above really need to take notice of rebalancing. It’s time to take some winnings and build safer assets that you could access if you needed to spend from your portfolio. Moving money into high-quality bonds removes risk and takes advantage of current attractive yields.
Q: What do you recommend for people who are still working and saving for retirement?
A: They should rebalance as well, but their main consideration should be their U.S. versus non-U.S. exposure. Most investors are underallocated in international stocks. Consider your style diversification as well, paying attention to underperforming areas.
Review your retirement contributions, to see if you can boost or even max out your company retirement plan for the year. People over 50 can make catch-up contributions, and there are special catch-up contributions this year for people between 60 and 63. You can contribute to IRAs and HSAs until the tax filing deadline.
Q: How can people over 73 connect their RMDs with portfolio rebalancing?
A: Required minimum distributions must be taken on time, but they can also help meet your rebalancing. By using appreciated securities to meet your RMD, you de-risk your portfolio, satisfy the IRS