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Diversification reduces risk by spreading investments across different asset classes, sectors, and geographic regions, so a downturn in one area is less likely to drag down the whole portfolio. In retirement savings planning, this helps smooth returns over time and can improve the risk-adjusted outcome, which is especially important when you’re relying on your portfolio for income in later years. By not putting all eggs in one basket, you lower the impact of any single investment’s poor performance and help protect against sequence-of-returns risk, where early losses can affect long-term outcomes. Diversification does not guarantee returns, so it won’t ensure you never lose money. It also doesn’t eliminate taxes or automatically maximize fees; taxes can still apply and fees depend on the chosen investments and accounts. The goal is to balance risk and potential return to support a more stable, reliable retirement plan.