The Pre-Retiree Portfolio Tune-Up


If you’re a baby boomer who is about to shift from being a saver to a spender, you have at least one thing on your mind: “Is this market rally going to turn into a market correction the day after I slice into my retirement cake?” It’s the perfect storm for retirees. So am I saying a recession is coming? I have no idea, and it’s nothing you can control or predict. But there are a few things that are in your control and should be addressed before a recession, not during one.

Portfolio Tune-up

There’s no better time than now for you baby boomers to reassess your tolerance and need for risk. Why? First, you’re coming off of several years of positive investment performance and thinking more rationally than you will during a market correction. Second, you’re approaching what is usually one of the most exciting and scary times in a person’s life – the point where your net worth reaches its peak. The right blend of stocks and real estate will help you keep pace with life’s rising costs (inflation) over the next few decades, and the right mix of bonds should protect you against a 2007-2009 stock decline. The lower your spending intentions, the less exposure you will need to investments that cause you stress.

Convert Assets to Income

If you are unable to be flexible with your spending or you will struggle to stay disciplined in hard times (what did you do in 2002 and 2008?), now is the time to face that reality. You may be served well by converting a small portion of your portfolio to an immediate fixed annuity to produce an income stream for your essential expenses (mortgage/rent, groceries, medical, etc.). But remember that there is no free lunch with any “guaranteed income for life” products – a fixed monthly check feels good until you suddenly realize that stamps cost $1 and gas is $10 per gallon. You will either need to be ready to reduce your spending a bit, or take more risk with the rest of your assets. And unless you pay extra fees for bell-and-whistle annuity products, there’s no turning back once you buy it.


They say that airplanes are off course 90% of the time – they just make constant course corrections until they land. If you are told that your assets have an 80% chance of outliving you, it means that 80% of the time you can spend well beyond your estimates and/or your loved ones will receive an inheritance. The other 20% of the time you have to be open to making the occasional modest sacrifice (reduced spending for a year or two, taking out a reverse mortgage, selling the house and renting, etc.). If your portfolio is properly constructed and maintained, and you can resist the urge to speculate on the direction of the market, you will always be off course…but you will still land safely.

Happy pre-retirement,

The opinions expressed are those of the author and are subject to change without notice in reaction to shifting market conditions. This blog is provided for informational purposes, and it is not to be construed as an offer, solicitation, recommendation or endorsement of any particular security, products, or services.