Strike the right balance between growth and income. When contemplating a move into more conservative investments pre-retirement, it's important to pay attention to the timing.
"One of the biggest mistakes investors make in their 50s is getting too conservative," says Clint Thomas, a certified financial planner and co-founder of Integrity Wealth Solutions in Greenwood Village, Colorado.
Thomas says investors often view their time horizon for investing in terms of their retirement date. The reality is that it they should be thinking of the bigger picture instead and factoring in how long they plan to live off their investments once they retire.
"If a portfolio needs to last 30 to 40 years, there needs to be some growth-oriented assets in the mix to make sure it keeps up with inflation so the investor doesn't run out of money," Thomas says.
Paul Jacobs, a certified financial planner and chief investment officer with Palisades Hudson Financial Group's Atlanta office, says investors run the risk of shortchanging their retirement assets by playing it too safe.
"Taking on too little risk can increase the odds of outliving your assets," Jacobs says, and investors need to understand the true cost of being overly cautious where stocks are concerned.
Consider your cash reserves. Beyond reviewing tax-advantaged accounts, 50- and 60-somethings need to take stock of their liquid assets.
"As a rule of thumb, investors should have six months' of living expenses saved to handle unforeseen expenses life sometimes hands us," says George Clough, vice president of wealth management strategies and People's United Wealth Management in Bridgeport, Connecticut.
Peter Maris, a certified financial planner and founder of Resource Financial Group in Wilmette, Illinois, says investors should think carefully about committing a substantial portion of their investment portfolio to cash.
"At today's interest rates, it makes little sense to hold cash beyond a three- to six-month emergency fund," Maris says.
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