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The near-retiree has to manage portfolio risk and have just the right amount of stock exposure for a good chance at sizeable profits and decreasing the possibility of investment loss that he or she cannot recover from. Some financial firms say that a relatively low 20% of your overall portfolio in stock may be able to tide you over retirement if you set your sustainable withdrawal rate at 3.8% per year. These same experts say that a portfolio mix that has this much in stock has a 90% probability of lasting three decades.

Other financial planners say that the stock exposure sweet spot is in the range of 40-60% for those five years or less from retirement. A very conservative 10% in stocks do not have as big an advantage in terms of potential profit growth, while a risky 80% in the same investments come with high degrees of volatility that dictates you should not withdraw too much per year of retirement if you want to make your funds last.

The cash-strapped worker also has other portfolio strategies, which addresses the issue of investment risk in various ways. There are some pros who establish portfolios that do not use stock exposure to change the amounts of possible yield and the degree of risk. For example, some target-date funds diversify and spread risk with commodities, bonds, and stocks as their performance differs in various environments. There are also other strategies based on the idea that workers near retirement should not invest in anything but the most conservative income sources.

Boston University finance specialist Zvi Bodie says that many investors build their financial strategies and emphasize the likelihood of success while tossing aside the impact of possible investment loss on the overall nest egg. He recommends that people saving up for their upcoming retirement should buy stock conservatively, and instead depend more on TIPS or Treasury Inflation-Protected Securities and savings bonds that are inflation-indexed to generate enough income to cope with the rising costs of consumer goods and services.

If you are planning to integrate these findings in your financial re-planning for your upcoming retirement, you will have to realize that these are simply guidelines, and not absolutes. Sustainable withdrawal rates and portfolio mixes are rough estimates made through informed assumptions, and may not be applicable to all investors. When it comes to stock exposure, the near-retiree needs to be flexible when it comes to withdrawals and investing in light of current market conditions.

About the Author:

Katherine Smith is an author who specializes in financial topics concerning seniors. Puritan Financial Group gives the near-retiree and retired senior access to stable. For more information on how Puritan Financial Group can help you, please visit our website at http://www.puritanlife.com.

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