BERLIN – During the five
years leading into retirement, there’s an almost inevitable change in how you
focus on this time in your life.
With just five years to
go until you retire, you certainly don’t want to be exposed to too much risk.
This is an ideal time to speak with your financial advisor about how best to
balance your need for income with your desire for continued growth of your
portfolio. There’s a good chance that growth stocks may well still play a role
in your portfolio as you approach retirement. In fact, being overly
conservative with your investments just before you retire could limit your
opportunity to keep or exceed the pace of inflation.
How do you strike the
right balance between safety and growth? According to Merrill Lynch’s
Retirement Group, “this is a great time to think about how you can establish
your guaranteed income base with solutions like a variable annuity, which can
provide a guaranteed income floor no matter where the market goes. Even putting
a portion of your portfolio into an annuity can help provide growth potential
through tax deferral and market participation as well as greater income
security.” You may even wish to link certain regular expenses, such as health
insurance premiums, to income from predictable sources, whether it’s Social
Security, a pension payment, earned income or an annuity.
Potential health care
expenses should also figure into your strategy. In fact, another reason many
younger retirees stay in the workforce is to draw health benefits. If you plan
to retire before age 65, devote some thought to how you’ll bridge the gap —
with COBRA or other group coverage — between your end-of-coverage date and the
start of your Medicare eligibility.
The run-up to retirement
is also a smart time to look into long-term care insurance, which can help
cover the costs of home health aides or nursing home care.
Where you’ll spend your
retirement factors heavily into your retirement plan – If for no other reason
than because your location informs your cost of living.
factor to consider is the kind of support system you would have if you moved.
You may be leaving behind a network of connections that would need to be
that your life in retirement matches your vision should be the motivation
behind your decisions in those critical five years before you switch gears.
Work with your financial advisor to develop strategies that can enhance your
Merrill Lynch Wealth Management Advisor. She can be reached at 410-213-8520.)