More than 2 million American households will have to postpone retirement due to recent economic conditions, a 2003 survey found. Nine out of 10 survey respondents (earning at least $75,000 per year) said their portfolios lost value; 73 percent expected that it would take at least three years for their portfolios to return to the levels they saw at the peak of the bull market.
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Investments of all kinds are typically subject to varying levels of risk. The following facts can help you understand how much risk is appropriate for your own portfolio. Generally, the greater the potential return from an investment, the higher the risk.
Debt instruments (such as bonds) and cash equivalents are typically considered more conservative than stocks, although exceptions exist. The return and principal value of stocks and bonds fluctuate with changes in market conditions. Shares, when sold, may be worth more or less than their original cost.
Financial Risks Often Lowered as Retirement Nears
Retirees may want to assume less risk than other age groups because losses could affect their current income. Individuals who are nearing retirement may want to begin moving assets to more conservative vehicles to prevent losses from which they may not have time to recover.
One way to help control the risk level in your portfolio is through asset allocation. If you are near retirement, you should consider allocating more assets to conservative investment vehicles. If you are already retired, a smaller percentage of your portfolio should be in high-risk vehicles.
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Retirement Linked to Suitable Asset Allocation
Having to postpone retirement because of stock market losses would be a disappointment, but it’s not inevitable. By assuming a risk level appropriate to your personal situation and goals, you may be able to avoid obstacles to your plans for retirement.