Wait a minute: Stocks are risky. “You don’t want to have too much in stocks, especially if you’re so reliant on that portfolio, because of the volatility of the market,” says Schwab-Pomerantz. One route has nearing-retirement investors moving to 60% stocks as you approach retirement, and then trimming back to 40% stocks in early retirement and 20% later in retirement.
“Diversification is critical, too,” says Schwab-Pomerantz. “That means having a mix of small-cap, large-cap and international stocks, as well as a mix of industries and companies within those categories. While diversification doesn’t ensure a profit or eliminate the risk of investment losses, too much of any one stock carries a major risk of its own. Think mutual funds and exchange-traded funds for easy ways to get this diversification.”
Diversification also means investing beyond stocks. For steady sources of retirement income, look into U.S. Treasuries, municipal bonds, corporate bonds and real-estate investment trusts (REITs), to name a few options. Owning gold is another way to diversify your portfolio, as is owning real estate.
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