It is important to adjust the asset allocation of your investment portfolio as you get closer to retirement because your investment goals and risk tolerance change over time.
As you approach retirement, your investment goals may shift from a focus on growth to a focus on preserving your savings and generating income. This means that you may need to adjust your asset allocation to reduce your exposure to riskier investments, such as stocks, and increase your exposure to more conservative investments, such as bonds and cash.
A portfolio that is too heavily invested in stocks can be vulnerable to market volatility and large losses, which can be especially damaging to retirees who are relying on their savings to generate income. By shifting some of your investments to more conservative assets, you can help reduce the risk of large losses and provide a more stable source of income in retirement.
In addition to adjusting your asset allocation, it is also important to consider other factors, such as your anticipated retirement income needs, your tax situation, and your estate planning goals. For example, you may want to consider investing in tax-advantaged retirement accounts, such as IRAs or 401(k)s, or working with a financial advisor to create a comprehensive retirement plan that takes into account all of these factors.
Overall, adjusting the asset allocation of your investment portfolio as you get closer to retirement is an important step in ensuring that your savings are well-positioned to generate the income you need to enjoy a comfortable retirement.
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