When it comes to retirement planning, nothing matters more than saving early and often. Those who get started with their retirement portfolios while they remain young inevitably do the best, because nothing can outperform the effect of years of dedicated, regular saving. While establishing strong lifelong habits is important, though, figuring out just how to segue into retirement can be nearly as much so. This part of Retirement Planning is probably less frequently remarked upon, but it is something that everyone who aims toward a secure retirement should be aware of.
In most cases, young savers today will be advised to invest most of their nest eggs into index funds that track the overall performance of the stock exchanges. On top of this, most of the youngest investors will also be encouraged to pick out a few select single issues to track at a given time, with this focus contributing more in the way of potential upside to their portfolios.
While that advice will make good sense for the youngest investors, something else entirely will normally best suit those who are approaching the age of retirement. As investors come within ten or fifteen years of the date they will finally stop working and begin drawing down their savings, they need look into much the opposite of what young investors are advised to do.
What that typically means is inclining away from the equities markets entirely and focusing instead on investments like bonds. While the stock markets, over the long term, are generally unequaled in their potential for producing appreciation, they can be fairly volatile over shorter time horizons. For an investor whose retirement will only be ten or so years away, it can therefore make good sense to begin pulling out of them.
That generally means that investors should aim to be well positioned for retirement long before they actually contemplate it. Giving up on much of the potential for appreciation over the last ten years of saving will not be an option for every investor, but being able to do so will greatly improve upon the flexibility enjoyed during that last phase of Retirement Planning.