Many Baby Boomers have already retired, and millions more will be making the move over the course of the next decade or so. While not every person or couple will have been diligent with saving and investing over the years, most will have at least some retirement funds to draw upon when the moment arrives. Of all the stages of financial planning for retirement that the average individual goes through, the most critical often turns out to be the last. Figuring out how to transition to a portfolio that will lock in and protect gains over the course of the last few working years quite regularly turns out to be the most important move of all.
Fortunately, there are some simple ways of coming to grips with this common challenge. The most significant thing to understand is simply that having relatively few years left until retirement means that risk is no longer to be embraced. People with decades of working life still before them can afford to suffer some setbacks in pursuit of greater returns, as they will still have time to recover. With those for whom retirement is only a few years off, on the other hand, a single such reversal can easily prove to be devastating. Given that investments which have potential to produce significant returns almost always come with an associated amount of risk, avoiding this in the later years of a person’s career will almost always be advisable.
In practice, this will mean that many who are soon to retire will do well to start liquidating stock positions and putting the money in safer places. In some cases, selling off especially risky stocks and investing in slow-moving blue-chip issues and the like can be helpful, as well.
Many other investors, though, will want to start to focus more on bonds, even if this means seeking out the relatively high yields typical of municipal or corporate debt instead of the much smaller ones associated with promissory notes written by national governments. Beyond this important move, it will also typically make sense for older investors to start transitioning cash into truly liquid, spendable form, even to the point of withdrawing from money market funds in favor of bolstering a checking account.