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Your investment strategy is likely to change when approaching retirement

Wealth preservation carries more weight than growing your portfolio

Updated:

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By:
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Mark Huffman
Reporter

Mark Huffman has covered consumer issues since 2004, with a special focus on protecting and empowering older adults. A former news correspondent for the Associated Press Radio Network, Westwood One, and ConsumerAffairs, Mark brings decades of journalistic experience to RetirementLiving.com. He is passionate about giving consumers a voice and helping them make informed decisions. Mark has also created educational content, including Senior Scam Alert, a video resource designed to help seniors recognize and avoid fraud. He holds a B.A. from the University of Kentucky and lives with his family in Richmond, Virginia.

Photo by Joshua Mayo on Unsplash

Key Insights

  • Preserve, Then Grow: At or near retirement, protecting principal becomes more important than chasing high returns.
  • Plan for Longevity: With life expectancy stretching into the 80s and beyond, Baby Boomers need to prepare for 20–30 years of income.
  • Inflation Is the Silent Threat: Even modest inflation can erode retirement savings — investing must beat rising costs over time.

As Baby Boomers enter the final stretch of their careers — or step into retirement altogether — the focus of their financial planning must shift. 

No longer is the priority aggressive growth or high-risk bets. Now, it’s about security, sustainability, and making sure a lifetime of savings stretches long enough.

Here are the three most important investing rules that financial advisors suggest every baby boomer should understand as they approach or enjoy retirement:

1. Preservation first, growth second

In your working years, it made sense to ride out market volatility. If the market dipped, you had time to recover. But in retirement, there’s far less room for error.

This is the time to prioritize capital preservation. That doesn’t mean abandoning growth altogether — retirees still need to outpace inflation — but it does mean reducing exposure to highly volatile assets. 

A diversified portfolio that leans more on bonds, dividend-paying stocks, and lower-risk investments can provide a smoother ride while still offering moderate returns.

It’s also critical to maintain a cash buffer. Financial planners often recommend retirees hold 6–12 months’ worth of living expenses in liquid, low-risk accounts to avoid selling investments at a loss during downturns.

2. Plan for 20–30 years of income

Thanks to medical advances and healthier lifestyles, today’s retirees are living longer than ever. A couple retiring at 65 has a high chance that at least one partner will live into their 90s.

That longevity poses a big challenge: Will your money last?

The old “4% rule” — withdrawing 4% of your portfolio per year — is a starting point, but not a guarantee. Rising healthcare costs, potential long-term care needs, and unpredictable market returns mean withdrawals must be carefully managed. 

Working with a financial advisor to create a dynamic withdrawal strategy can help ensure your savings survive as long as you do. A financial advisor can guide you through the various income-producing options.

3. Stay Ahead of Inflation

Inflation might feel like a minor nuisance year to year, but over decades, it’s a major threat. Even at a modest 3% annual inflation rate, the purchasing power of your money will halve in about 24 years.

That’s why a retirement portfolio still needs growth-oriented investments, even after reducing overall risk. Equities, particularly in sectors like healthcare, consumer staples, and technology, can help hedge against inflation. Treasury Inflation-Protected Securities (TIPS) and real estate investment trusts (REITs) are also valuable tools.

Before making any changes in investment strategy, it is usually helpful to consult a trusted and objective financial advisor. Retirement Living offers tips for finding the best financial advisors here.