Should you dump your stocks if retirement is approaching? | Smart Change: Personal Finances
The past week has been volatile when it comes to the stock market. But that wasn’t particularly unusual either.
The reality is that the stock market is known to be volatile and has seen its share of corrections over the years. Investors who stay the course and keep their portfolios intact during downturns can often avoid losses and come out ahead.
However, things get risky when your wallet takes a hit as you’re about to retire. So that begs the question: should you hold on to your stocks if retirement is just around the corner? Or is it better to throw them away and stick to safer investments instead?
Don’t go to extremes
Whether you are investing for your retirement in an IRA, 401(k) plan, or brokerage account, it’s a good idea to switch to safer and more conservative investments as you approach this stage. Once you retire, you may need to start dipping into your wallet to cover your expenses, as you probably won’t be able to manage your bills on Social Security alone. And if you’re heavily loaded with equities, that could mean having to liquidate investments when they’re down, locking in losses.
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But while it makes sense to reallocate your assets as you approach retirement, it’s better to get rid of your stocks entirely. not actually a wise decision. On the one hand, you will need stocks in your portfolio so that your savings can continue to generate growth during your retirement years.
Second, let’s say you’re about to retire and you have 50% of your portfolio in stocks. If the market crashes just before your retirement date, you can simply access the non-market portion of your portfolio as needed and wait out that downturn.
Good stocks to hold in retirement
Keeping stocks in retirement could help ensure your portfolio maintains decent growth. That said, retirement is not the time to stock up on speculative stocks that carry a lot of risk. If you plan to own stocks in retirement, you may want to stick with proven companies that have been around for many years.
It’s also important to own a diverse stock mix in retirement. This means that in the equity portion of your portfolio, you shouldn’t have 85% of your assets in tech stocks. If this sector collapses, it could mean bad news.
Another good option for retirement is to own a large market AND F. These will give you decent exposure to a range of stocks, lending to more diversity in your portfolio. Additionally, the advantage of ETFs is that they take a lot of the guesswork out of investing. And that could, in turn, take the stress off your plate.
Finally, consider holding a few dividend stocks. This way, you will be aware of the regular payments that you can cash out as needed or reinvest.
While you may need to make changes to your portfolio in the years leading up to retirement, don’t make the mistake of dumping your stocks entirely. Instead, invest in stocks in moderation so that your portfolio can continue to grow even as you regularly exploit it.
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