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How Much Risk Should You Take Before Retirement?

Mark D. Berghuis, CFP®, AAMS®,
Financial Advisor
Edward Jones

If you’re planning to retire in just
a few years, you may be getting
excited about this next phase of your
life. However, your ability to enjoy
retirement fully will depend, at least
partially, on the resources you can
draw from your investment portfolio.
So, while you still have time to act, ask
yourself if you’re comfortable with your
portfolio’s risk level.
• Your relationship with risk can
change noticeably over time. When
you started saving for retirement, you
may have been willing to take on more
investment risk, which translated into
a relatively high percentage of stocks

and stock-based mutual funds in your
investment portfolio. As you know,
stocks offer the potential for greater
returns than other assets – such as
bonds and certificates of deposit (CDs)
– but they are also typically more
volatile and carry more risk. But when
you were many decades away from
retirement, you had sufficient time to
recover from market fluctuations. (Of
course, there are no guarantees – it’s
possible that some stocks will lose
value and never regain it.)
• Now, fast forward to where you
are now – closing in on retirement.
Even at this stage of your life – and,
in fact, even during your retirement –
you will need some growth-oriented
investments to help stay ahead of
inflation. Over time, even a low inflation
rate, such as we’ve had the past several
years, can erode your purchasing
• So, the issue isn’t this: “Should I
get rid of all my risk?” You shouldn’t
– and, in fact, you couldn’t, because all
investments, even the ones considered
most “conservative,” contain some

type of risk, even if it isn’t the risk of
loss of principal. For instance, some
investments run the risk of not keeping
up with inflation. Instead, ask yourself
these questions:“How much risk should
I take within my portfolio?”“How much
risk do I actually need to achieve my
goals in retirement?”
• Of course, there are no onesize-fits-all answers. You’ll need to
look at your investment portfolio to
see if it’s positioned to provide you
with the income, you’ll require in your
retirement years. You might have
initially based your financial strategy
on a specific type of retirement lifestyle,
but now that you’re nearing retirement,
perhaps you’ve changed your mind.
Your anticipated new lifestyle might
require either more or less income than
you had originally projected – and if
that’s the case, you may need to adjust
the risk level in your portfolio or make
other adjustments.
For example, suppose you had
initially envisioned a rather quiet
retirement, sticking around your home,
volunteering and spending time with

your grandchildren. But in recent years
– and especially since the confinement
many of us have felt during the
COVID-19 pandemic – you may have
thought that you’d now like to travel
extensively. To achieve this goal, which
will likely cost more than your original
one, you may have to work longer,
or invest more each year until you
retire, or seek a higher return on your
investments – which means accepting
more risk.
As you can see, managing risk is a
balancing act – and you may need to
make some tough choices. But as long
as you’re aware of how much risk you
can take, and how much risk you may
need to take to reach your goals, you
can develop a strategy that aligns with
your objectives.
This article was written by Edward
Jones for use by your local Edward Jones
Financial Advisor. Edward Jones, Member
To schedule an appointment to meet
with Mark, call 262-551-8089 or email: