Kevin R. from San Jose, CA asks: I’m planning to retire when I turn 65, which is exactly six months from now. Should I plan to change my investment portfolio into a more conservative position at or around the same time? Since retirement is such a big life adjustment, I’m figuring that I’ll need to make big adjustments in other areas like spending and investing too.

Mitch’s Response: Thanks for writing, Kevin, and congratulations on your retirement. I can tell from the tone and content of your question that you are a forward-thinking planner, which is a great attribute to have when it comes to investing and retirement.

Let me start with a few words on spending before I get to the investing portion of your question. In all likelihood, your spending habits will change once you enter retirement, for a couple of reasons. For one, you may find yourself in a lower tax bracket since your sources of income are coming from passive sources like Social Security and or/retirement accounts. Your expenditures may also be a touch lower in your early years of retirement, though they could increase over time as health care potentially becomes an increasing share of total spending. So, I generally think the more you can contain costs early-on in retirement, the better.

As for the investing portion of your question, I would advise you to reconsider your plan to completely overhaul your investment portfolio at the time of retirement. You’re right in saying that retirement is a big life change, but your investment strategy should still be managed as though it has a 20–30-year time horizon, depending on your current health. If I were you, I’d be planning to live to age 90, which means having a 25-year investment time horizon. Unless you have heavy cash flow needs early in retirement (which hopefully you do not), I think there is an argument to keep a material allocation to stocks.

Now, it is impossible for me to say whether you need to completely change your investment strategy without knowing what your current strategy looks like. But, if you are currently allocated for long-term growth given you are still earning and saving, then you may not need to do a whole lot of changing to your current strategy once you retire. Again, with many retirements lasting 20 years or more, you’re almost certain to need the growth that stocks can provide.

The one overhaul/change you may want to consider once you retire is rolling over your 401(k) or retirement plan into an IRA. In that sense, you may end up having completely different investments, but your overall allocation may actually remain the same. For example, if you are currently allocated 70% stocks and 30% bonds in your retirement account, it may very well be that the allocation makes good sense for you going forward as well. At Zacks Investment Management, we provide a customized analysis for each of our clients and then use our independent market research to design an investment portfolio based on each individual’s specific needs. When you rollover your 401(k), we may decide to keep you in 70% stocks and 30% bonds. But looking at your situation, we may choose to invest in different categories and types of bonds and stocks than your current plan. Those decisions would be based on our expertise and view of your financial situation and the markets. If you are unsure if your current allocation is right for you, I would recommend reaching out to one of our wealth management advisors at 1-888-600-2783 for a free asset allocation.

If you are still unsure if your current plan fits your long-term retirement goals, I advise you to download our guide, “Three of Our Top Performing Strategies Revealed.” This guide outlines three strategies that can help you invest in a market for the long-term. In fact, it outlines three of Zacks strategies that can help you achieve growth and value. Learn more by clicking on the link below:


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