Designing an Asset Allocation Strategy for Retirement Planning

Ben, a 45-year-old financial advisor, manages a portfolio for a client who is a 60-year-old high-net-worth individual planning for retirement. The client has a conservative risk tolerance and has expressed a desire for both capital preservation and income generation. Current assets include:

• $2 million in equities, split between domestic and international stocks.
• $1 million in fixed income, divided among government bonds, corporate bonds, and municipal bonds.
• $500,000 in alternative investments, primarily real estate investment trusts (REITs).

Since the client is nearing retirement, Ben needs to recommend an asset allocation strategy that balances risk and return while achieving the client’s objectives. Discuss the factors Ben should consider in designing an integrated asset allocation framework, including the impact of changes in interest rates, market volatility, liquidity needs, and tax implications. Additionally, explain how Ben could implement the proposed asset allocation and monitor its effectiveness over time.