Close to retirement? Don’t wait to review your assets or make changes.

The years leading up to retirement can be both stressful and exciting. After years of hustling a job, it’s nice to think about having your days to yourself and being able to take and travel as you wish.

But to achieve that last goal, you’ll need a healthy level of retirement income. In fact, you’ll need a solid income to cover not only your leisure expenses, but also your essential bills, from housing to food to healthcare. So if you’re a few years away from retirement, it’s important to take steps to protect your income when making this key decision.

Check your asset allocation

Anyone who has followed the stock market this year knows that it has been an approximate number of months. Many investment portfolios have been down since the start of the year, and we don’t know what the coming months have in store.

If you’re decades away from retirement, there’s no need to panic in the face of a bear market. Stocks have a long history of losing value only to rally thereafter. But if you’re less than a year or two away from retirement, a stock market crash or, even worse, a full-fledged accident could really mess up your plans.

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That’s why it’s so important to check your asset allocation as you approach retirement. While it’s certainly not advisable to get rid of your stocks before retirement, as you’ll need them in your portfolio to continue generating strong returns, you’ll also want better access to safer investments, such as bonds. , which tend to be much less volatile.

Not only that, but if you’re nearing retirement, it’s important to keep some of your savings in cash. That way, if the stock crashes, you won’t be stuck in a position where you have to liquidate investments at a loss to cover your living expenses.

How much of your assets should you keep in cash? At a minimum, maintain a cash balance high enough to cover a full year of living expenses. You may even want to aim for more than two years, depending on your other sources of income, such as Social Security.

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In fact, outside income should play a role in determining your asset allocation. If you know that you will continue to generate income in retirement thanks to a rental property you have and anticipate a generous social security benefit due to your earnings history, you may not need as much money as someone with a tiny social security benefit and no other source of income.

Don’t wait until you’re retired to make changes

The last thing you want to do is retire, become dependent on your nest egg withdrawals and so realize that your asset allocation is exposing you to excessive risk. Instead, do a thorough portfolio assessment when retirement is a few years away and make changes then. This could put you in a much better position to weather a stock market storm and avoid a scenario where you are forced to make lifestyle changes due to losing money.

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