Living Longer, Living Better | Finance

Change as you close in

Advisers say make plan for retirement, adjust as you age

By Todd Wallack
Globe Staff / February 27, 2011

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Building a nest egg is never easy. But investing only becomes trickier as you near and eventually begin retirement.

“When people get into their 50s and 60s, they are hitting the homestretch,’’ said James F. Sampson, managing principal of Cornerstone Retirement Advisors LLC of Warwick, R.I. “They can see the light at the end of the tunnel and they pray it’s not a train.’’

To avoid a financial train wreck, advisers recommend investing in a broad mix of stocks, bonds, and other vehicles; adjusting portfolios as you age; and finding ways to stretch savings.

Consider other factors, too, such as the need for some investments to generate dividends, interest, or other income. Here are some tips.

Keep saving

Save as much as you can, instead of counting on huge investment gains. The IRS allows workers 50 and older to make additional “catch-up’’ contributions to their retirement plans. “Increasing the amount you save will move the needle much more than investing aggressively,’’ Sampson said.

Make a budget

The lower your retirement expenses, the longer your nest egg will last. Keep in mind that some costs, like health care, rise as you age.

Examine your entire portfolio

Most investors have different accounts and assets. When deciding where to invest, it’s important to see the whole picture: 401(k)s, IRAs, bank accounts, bonds, stocks, real estate, and other investments.

Keep it simple

Financial companies offer a dizzying array of choices, so advisers suggest paring your holdings to several mutual funds or other types of investments that you understand. For example, don’t just spread money across the many options offered by 401(k) plans. Understand the focus of each fund and how it fits into your portfolio.

“Know what you own and why you own it,’’ said Benjamin J. Muchler, managing partner at Boston Research & Management in Manchester.


Be careful not to have too much money in one stock or type of investment. A broad mix is best, advisers say. “It’s like a six-cylinder engine,’’ said William Harris, a certified financial planner with WH Cornerstone of Duxbury. “Even if one cylinder pops out, at least the others are moving forward.’’

Don’t write off stocks

Sure, stocks took a pounding in the last downturn. But over time, they tend to produce the biggest gains. So unless you have all the money you need, it’s important to keep a portion of your portfolio in the market.

Keep in mind that after retiring, you may live another 30 years — or more. You may want to invest some of your money for the long term.

Adjust your portfolio over time

Most financial advisers recommend reducing exposure to stocks as you grow older. The conventional rule of thumb for stock holdings is to subtract your age from 100. So, if you’re 50, you’d invest 50 percent of your retirement assets in stocks.

That approach won’t work for everyone. If you have sufficient savings, for instance, you might care more about preserving assets than squeezing out higher returns.

Stocks or stock funds?

Advisers differ on which stock investments are best. Some urge investing in a few broad index funds, which have lower fees than actively managed funds. Others prefer funds run by experienced managers, believing talented stock pickers can achieve better returns.

Muchler advises wealthier investors (with $500,000 or more in investments) to invest directly in 30 to 40 quality stocks that pay dividends. He cites two advantages. First, investors know exactly what they own. Second, he says, investors can avoid fund management fees and reduce taxable gains with individual stocks.

Keep some money in safer places

As you edge closer to retirement, shift money into bonds, bond funds, and other investments than tend to generate steadier returns than stocks.

But remember, bond mutual funds go up and down, too. Harris recommends clients invest only in short- and intermediate-term bond funds, which tend to fluctuate less.

Muchler recommends buying individual bonds with different maturity dates, which should return principal, plus interest, if buyers hold them to maturity.

Some investors prefer to keep money in certificates of deposit, money market funds, and high-yield savings account, which won’t garner much interest, but typically won’t lose money, either.

Consider alternatives

Some advisers recommend putting a small portion — generally not more than 10 percent — of portfolios in alternative investments, such as gold, real estate, or long-short funds. Laurie Bachelder, a principal with NUA Advisors LLC of Portland, Maine, said her firm has worked with clients investing in everything from a four-unit apartment building to show horses. “There are more opportunities than just the stock market out there,’’ Bachelder said.

Advisers stress there’s no one perfect portfolio for everyone. Many investment companies (including Fidelity Investments, Vanguard, and T. Rowe Price) offer tips and tools on their websites. You might also consider sitting down with a financial adviser. “Everyone’s situation is different,’’ said Harris.

Todd Wallack can be reached at