Investment Decisions for Those Nearing Retirement

By Jorden Meltz

During the current recession, and the past year more specifically, exposure to equities has left many retirement portfolios with substantial losses that could take years to make back.
For those not planning on retiring in the near future, they can follow the cyclical nature of the market and hope to make back their money over time; but those looking to retire in the near future lack this luxury. In the beginning of the year 2008 the Employee Benefit Research Institute released a study saying 40% of investors between the ages of 56 and 65 had 70% of their retirement accounts in equities. This age range is a crucial point where many begin to contemplate retirement, and thus heavy exposure to equities has left many of these people adjusting their retirement plans. Advisors are now recommending reducing equity possessions by 1-2% each year after a certain age; in an effort to minimize potential losses as one nears retirement. With that said though, it is still important to maintain a diversified portfolio, as this can be the key to your retirement portfolio’s recovery. A recent study showed that the combination of delaying retirement by one to two years and maintaining a well diversified portfolio would help those looking to retire in the near future return their portfolios to an adequate level faster then if the same people would have converted their money to cash, as they will be required to work even longer. For those looking to invest wisely as their potential retirement date approaches, it seems making adjustments towards safer levels of diversification each year may be the most effective way to keep one on their route to retirement.


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