Originally published August 2015. Last updated March 2026.
Investment options are endless. But in or near retirement, your strategy comes down to three goals: grow what you have, generate income from it, and protect it from major losses. Here’s how to approach each.
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1. Capture Growth Without Trying to Time the Market
Some people automatically sell when the market drops and miss the recovery. Others hold too long and miss better opportunities. Both mistakes stem from emotional decision-making.
One approach: set rules in advance. For example, rebalance your portfolio annually back to target allocations. If stocks have grown to 70% of your portfolio but your target is 60%, sell the excess and move it to bonds or cash. This forces you to sell high and buy low without guessing.
Another option: use dividend-paying stocks or funds. You get growth potential plus regular income, and you don’t have to sell shares to generate cash flow.
2. Generate Reliable Income
In retirement, your portfolio needs to pay you. Common income sources:
- Bond funds and individual bonds: More predictable income, though bond prices can fluctuate with interest rates.
- Dividend stocks: Companies with long histories of paying (and increasing) dividends can provide growing income over time.
- Systematic withdrawals: Sell a fixed percentage of your portfolio each year. The classic “4% rule” suggests withdrawing 4% of your portfolio in year one, then adjusting for inflation each year. It’s a starting point, not a guarantee.
The right income strategy depends on your total picture: Social Security, pensions, required minimum distributions (which start at age 73 or 75), and how much of your spending is fixed vs. flexible.
3. Protect Your Wealth
Preserving capital becomes more important as you age. A 30% market drop at age 40 is recoverable. At 70, it can permanently damage your retirement income.
- Diversify across asset classes: Stocks, bonds, real estate, and cash serve different purposes. Don’t concentrate too heavily in any one area.
- Keep 1-3 years of expenses in cash or short-term bonds. This “bucket” means you don’t have to sell stocks during a downturn to cover living expenses.
- Review your allocation annually. As you age, gradually shift toward more conservative investments, but don’t abandon stocks entirely. You may need growth to fund a 25-30 year retirement.
FAQ
Is the 4% rule still valid?
It’s a useful guideline, not a precise rule. Recent research suggests 3.5-4.5% is a reasonable range, depending on your portfolio mix, time horizon, and flexibility. If you can reduce spending in bad years, you can sustain a higher withdrawal rate.
Should I move everything to bonds when I retire?
No. A 100% bond portfolio doesn’t provide enough growth to keep up with inflation over a multi-decade retirement. Most financial planners recommend keeping 30-60% in stocks even in retirement, adjusted for your risk tolerance and income needs.
Schedule a free 20-minute consultation to build a retirement investment strategy that fits your goals.
R.L. Brown Wealth Management
106 W Vine St, Suite 300, Lexington, KY 40507
859.317.5889
