As retirement gets closer, you'll want to pay closer attention to how your portfolio is allocated. It's a good rule of thumb to review your asset allocation every six months.
Review and rebalance
As your investment time frame and goals change, your asset allocation should keep up. If you have:
Adjusted your target mix to your changing circumstances over the years: You may only need to make minor changes in your allocation as you prepare for life without a paycheck.
Maintained the same target allocation for a long period: It's critical to reconsider it as retirement nears. For most pre-retirees, this may mean limiting exposure to riskier assets, such as stocks.
This doesn't mean selling all of your stocks-your portfolio may still need the opportunity to grow to keep pace with inflation during your retirement.
What's your personal retirement number?
Monitor your investments
Keep close tabs on your investments so that you can spot any changes or trends and address them in a timely fashion.
Annual checkup: Experts recommend completing a comprehensive review of your financial situation and goals every six months.
Simplify your financial picture: It's tough to manage money you can't easily see, but you do have choices. An IRA offers an easy way to maintain the tax-deferred status of your retirement plan while consolidating your retirement assets into one easy-to-manage account.Footnote 1 Consider all of your choices
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Consider income-producing investments
As you transition to retirement, this may be the time to consider shifting your investment focus from portfolio growth to generating income through investments like bonds and bond funds.
Fixed-income securities can generally offer less volatility than stocks, and may provide the opportunity to generate a reliable income stream. You also may want to think about purchasing annuities that can guarantee an income stream for life.Footnote 2
If you have a financial advisor, work with him or her to develop a fixed-income strategy designed to help meet your retirement needs.
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Consider shifting your
investment focus from
portfolio growth to
generating income