When it comes to saving for retirement, your investment choices matter—but so does your comfort level with risk. Whether you're just getting started or fine-tuning your portfolio, understanding your risk tolerance can help you make more confident, informed decisions.

What Is Risk Tolerance?

Risk tolerance is your personal comfort level with the ups and downs of investing. It’s about how much market fluctuation you can handle—both financially and emotionally—without losing sleep or making impulsive decisions.

Several factors shape your risk tolerance:

• Time horizon: How many years until you retire?
• Financial situation: What’s your income, savings, and debt picture?
• Personality: How do you react when the market dips?
• Goals: Are you aiming for growth, income, or capital preservation?

Why It Matters in Your Retirement Plan

Your employer-sponsored retirement plan likely offers a range of investment options—from conservative bond funds to aggressive stock portfolios. Picking the right mix depends on your risk tolerance.

Here’s why it’s important:

• Stay on track: Investments that match your risk profile help you stick to your plan—even during market swings.
• Avoid emotional decisions: Knowing your limits can prevent panic selling or overly risky bets.
• Reach your goals: The right balance of risk and reward helps you grow your savings over time.