During your working years, you’re supposed to do your best to sock away money in an IRA or 401(k) plan. But that money shouldn’t just sit in cash. Rather, you should invest it for growth.
The same applies during retirement. Once you stop working, you should plan to keep your IRA or 401(k) invested so it continues to grow (though it’s wise to retain a portion of it in cash, in case market conditions take a turn for the worse). If you’re on the cusp of retirement, here are a few important moves to make with your investments.
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1. Check your asset allocation
The right asset allocation could spare you serious losses in the event of a stock market crash while helping you maintain steady growth in your IRA or 401(k). As retirement nears, you’ll want to make sure you have a nice mix of stocks and bonds in your IRA or 401(k). You’ll need stocks to continue generating growth, while bonds will serve as your safety net, providing some amount of interest income.
How much of your portfolio should you keep in stocks versus bonds? That decision will boil down to a few different factors — namely, your personal appetite for risk and whether you have significant income sources outside your IRA or 401(k). But assuming your retirement plan will be your primary income, you may want to kick off retirement with about 40% to 60% of your assets in stocks and the rest in bonds. You can adjust that percentage based on your risk tolerance.