As you begin to rely on your investments for income, you may feel most comfortable investing heavily in income-generating bonds and CDs. But to counteract the long-term effects of inflation, you may need to keep a portion of your savings in growth-oriented stocks as well. Cover essentials with predictable income.
Divide your expenses into essential and discretionary categories and cover the essentials with predictable income sources. Don't be afraid to tap into principal.
Annual portfolio rebalancing is especially important when you're retired, not just during the accumulation phase. There's less time to recover from the potential losses of lackluster returns caused by a portfolio that has strayed from your chosen asset allocation. Stay flexible and re-evaluate as needed.
Things change. Situations change. Markets change. Priorities change. It's important to periodically revisit your portfolio asset allocation to stay aligned with your broader investment goals. Schwab-Pomerantz stresses that even for those five years away from retirement, there is still time to right their financial ship. "It's not too late," she says. "We are seeing, culturally, that baby boomers don't think of sitting in a rocking chair and knitting. They are thinking of second careers and working part time, still being viable and productive. So, there is time to build income. There is time to balance out that portfolio, get that cash stream up. Also, retirement today could be a 30-year endeavor, and you can do a lot in 30 years." "You don't get a lot of chances to change your retirement outlook," Schwab-Pomerantz adds. "The sooner you can start thinking about it and working on it, the better it will feel and the more choices you will have later in life." -- Written by Joe Mont in Boston. >To contact the writer of this article, click here: Joe Mont. >To follow the writer on Twitter, go to http://twitter.com/josephmont.