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Investment Decisions You Need to Make as you Approach Retirement

Retirement Investment AllocationPlanning for your financial future, saving, and investing is a responsibility that most people share. While it’s important to save as much as possible and invest throughout your career, your actual investment decisions will change as you continue to age. One period that requires more focus than others is when you are nearing retirement. There are several investment decisions and choices you should consider as you approach your retirement date.

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Investment Allocation
One of the most significant choices you will have to make when you are approaching retirement is how to allocate your investments. As you work throughout your career, it is likely that you had a significant amount of your investments in stocks, mutual funds, and index funds. While these may have provided you with a healthy return on investment over time, they do continue to pose a risk.

When you are nearing retirement, a significant drop in the market could be disastrous as you may not have the time to rebuild your nest egg. As you approach retirement, more and more of your investments should be taken out of the stock market and put into more secure vehicles such as bonds and fixed-income securities.

Annuity Options
Another important choice that you will have to make as you approach retirement is whether or not you should purchase an annuity. When buying an annuity, you will receive a certain level of income each year in exchange for a lump sum purchase. The revenue will then be guaranteed for life and can increase annually based on cost-of-living adjustments. While annuities can be ideal for those that would like to have a regular income, you could end up losing money if you pass away before recouping your initial investment.

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Social Security Payments
You will also need to consider when you should start receiving your Social Security benefits. If you have been paying into the Social Security system for your entire career, you are likely eligible to begin receiving Social Security payments as soon as you turn 62 years old. However, you will end up getting more money on a monthly basis if you wait to start collecting. The maximum benefit will be received if you hold out until you are 72 years old. The decision of when you should start collecting Social Security will need to factor in your age at retirement, your income needs, and even your current and future tax situation.

Planning for your financial future is a significant responsibility that you will have to manage throughout your career. As you approach retirement, there are several different critical financial decisions that you will have to make.

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