The period right before (and after) retirement is the most important period of your investing life. This is the period where you are most financially vulnerable.
Not only is pretty much all of your wealth tied up in your financial assets, you still have all of your retirement spending needs ahead of you. You need to be especially careful during this period (not that you shouldn’t be careful the rest of the time).
This article has some good suggestions for things to pay attention to as you approach retirement. That being said, some of the suggestions aren’t for everyone (like contributing to a Roth IRA), and I would shade some of the advice a little bit differently (like how to think about investment risk).
The article’s suggestion to invest in a Roth IRA will work for some folks because of some tax planning issues, but the approach won’t work for everyone, so you need to be sure it will work for you before you go down that road.
The article also suggests using a bucketing strategy for your investments as you approach retirement – invest some of your money aggressively for your needs further in the future, and more conservatively for your needs in early retirement.
Unfortunately time diversification doesn’t actually work. What we like to think about is the mix of your retirement income sources. You want to have a mix of income from reliable income sources (like Social Security, a pension, a bond ladder, etc.) that you can count on, and then income from your investment portfolio that has the potential for higher growth.
Everyone’s situation is different, so you need to think about what will actually work for you and your retirement. If you’re coming up on retirement in the next ten years, you owe it to yourself to read our ebook
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