Retiring soon? First of all, congratulations! Reaching this milestone is a massive achievement that requires years of dedication and discipline. But before you completely kick back and relax, there is some important financial housekeeping to do.
As you transition from the "accumulation" phase of your working years to the "preservation and distribution" phase of retirement, your investment strategy needs to shift. According to a recent report from Barron's, it’s currently the best time in years to rebalance for retirement and take some risk out of your portfolio.
Here are two key moves to consider making right now to protect your nest egg:
1. Trim Your Stock Winners
When the stock market experiences a prolonged bull run, your portfolio can naturally drift away from your target asset allocation. If you haven't rebalanced recently, you might find that equities now make up a much larger percentage of your investments than you originally intended.
While riding the wave of high returns is great, leaving your portfolio too heavily weighted in stocks right before retirement exposes you to unnecessary market volatility. Now is an opportune time to sell high, lock in some of those gains, and dial back your equity risk.
2. Boost Your Bond Allocation
So, where should those stock profits go? Fixed income.
For the first time in over a decade, bonds are offering genuinely attractive yields. By shifting funds from riskier equities into bonds, you are effectively hitting two birds with one stone: you are reducing the overall volatility of your portfolio while locking in a reliable stream of income. This creates a much safer harbor for your hard-earned cash just as you prepare to start drawing down on it.
The Bottom Line
Rebalancing isn't about perfectly timing the market; it’s about aligning your risk exposure with your current life stage. If retirement is on the horizon, taking some chips off the table today can provide you with the peace of mind you need to truly enjoy your golden years tomorrow.