What should you be invested in? You’ll probably want to be more conservative than before retirement. Yet that does not mean abandoning stocks. With potentially 20 or more years in retirement, inflation can eat away at lower returning assets. Even at a modest 3% annual rate, inflation could cut your standard of living in half in 24 years.
Planners may recommend that the portfolio hold at least two to three years of living expenses in cash, CDs and short-term bonds that can see you through a stock market decline. Beyond that, there is no special rule of thumb for allocation of stocks, bonds, cash and other assets. Much depends on your other sources of income, risk tolerance, age, financial goals, such as leaving money to children, living expenses and so on.
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