During your golden years, your investment-strategy focus shifts from capital appreciation to wealth preservation.
As such, your asset allocation should now reflect a more balanced mix of stocks and bonds, Adams stressed.
More conservative investors should have roughly 60 percent of their portfolio in fixed-income securities—including bonds, tax-exempt bond funds, real-estate investment trusts and certificates of deposit—with the remaining 40 percent in equities, such as mutual funds and individual stocks, he noted.
The inverse allocation would be appropriate for an aggressive investor or one who needs to pursue growth.
Whatever your tolerance for risk, just be sure you're not too conservative with your portfolio, warned Adams, who noted new retirees may live 30 more years off their savings and need to achieve a reasonable rate of return.
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"It might intuitively feel right to keep the money 'safe,' such as putting a lot in a money market fund for years at a time, but the opposite is true because inflation, higher medical costs and longevity require solid growth to overcome," he said.
As such, retirees should have only a small portion of their retirement-income stream tied to noninflation-adjusted fixed payments.
"Oftentimes, annuities and most nongovernment pensions are not inflation-adjusted," Adams said. "This means that in as little as 15 years, assuming 3 percent inflation, a $7,000 fixed-payment stream will have declined an amazing 37 percent to only provide the same purchasing power as $4,500 at the time of retirement."