As you get closer to retirement, you’ll need different things from your plan investments. In the early years, growth potential is most important, but by the time you reach retirement age, making your money last may become a bigger priority.

Here are a few things you can do to help prepare your portfolio for the shift from building retirement savings to creating retirement income. 

Turn down the risk while still allowing for growth

Investment professionals advise that, as you approach retirement, you should gradually reduce the risk in your portfolio—while still allowing for overall growth. How do you do this? By including investments that are less likely to be affected by economic volatility. This means owning less stocks and more bonds, stable value funds, and cash investments (including money market funds).

Target ranges for various age groups can be helpful in determining your level of exposure to stock investments. For example, based on target ranges from John Hancock, retirement plan participants in their 40s should aim to have 65% to 85% of their portfolios in stocks. By the time they reach their 60s, however, this range should drop to 40% to 50%. 

Targets for percentage of portfolio invested in stocks, by age range¹

Ready cash is always important

Regardless of your age, it’s important to prepare for a rainy day, and among investors, this includes times of market volatility. In addition to a separate emergency fund, you might want to include some cash investments in your retirement portfolio. This may help cover expenses should your other investments unexpectedly drop in value. 

Strive for stability

Once you’ve begun making withdrawals, allowing for potential growth is still important. By balancing risk, potential return, and the size and timing of your withdrawals, you can work to create a strategy that provides the income you need for as long as you think you’ll need it. This can make retirement income planning a lot less stressful, although, of course, your results will depend largely on the how the market does.

Consider an annuity

Issued by insurance companies, immediate annuities are contracts that, in exchange for an up-front payment, provide a certain amount of income monthly for an agreed-on amount of time. Some annuities can provide payments for life.

While this option may be a great solution for some, there are potential downsides to owning an annuity. As with other investments, you'll have to make sure you're comfortable with the funds' performance, and the rate you earn on your money may vary from fund to fund.

Consult with a financial professional

There are various approaches you can take to get your portfolio ready for retirement, but you may need some guidance along the way. If so, consider working with a financial professional who’ll take the time to help you define your income needs in retirement—and help you adjust your portfolio to meet them.

For complete information about a particular investment option, please read the fund prospectus. You should carefully consider the objectives, risks, charges, and expenses before investing. The prospectus contains this and other important information about the investment option and investment company. Please read the prospectus carefully before you invest or send money. Prospectuses may only be available in English.

1 John Hancock internal data: target asset allocations, as of June 2022.