 | | |
What should I do if I'm close to retirement?
| |
Just because you're getting closer to the finish line doesn't mean you should hit the brakes. But you may want to ease off on the accelerator a bit.
| |
|
People approaching retirement used to be advised to make their asset allocation more safety-conscious by dropping stocks and adding bonds. The problem with that approach is that nowadays people tend to live a long time. You might lead a healthy and active life well into your 90s! And there's no guarantee that Social Security will provide the kind of fallback support you expect. If you're too cautious, the well might dry up sooner than you'd like.
| |
|
So most financial specialists now advise that you keep a healthy growth component to your portfolio, meaning stocks or stock mutual funds. This approach reasons that you can withdraw from your portfolio to cover expenses in retirement, while still letting it grow enough to serve you for many years. So as you approach retirement--ideally by 10 years out, farther if possible--you should start calculating your future expenses and how much you can expect from your retirement account in terms of cash flows and future growth. These calculations can be quite tricky, but software programs like Morningstar's retirement planner or a reputable financial planner can help out.
| |
|
Of course, not everyone likes the idea of staking so much of their nest egg on the riskiest type of investment, and it's important that you take your risk preferences into account--along with factors like the overall size of your investment portfolio. And some people do need to put a certain amount of money in safe short-term bond funds, because they can't afford to risk any financial loss. Here, again, a financial planner can help you sort through the variables.
| |
|
