Age-specific investment advice

4. Retirees 

In today's market environment, retirees have the biggest concerns about what is happening to their retirement portfolio. Typically, at this stage you are no longer contributing to retirement accounts and are instead depending on distributions from those accounts to meet your living expenses.

Throwing in the towel and liquidating stock and mutual fund positions for the safety of CDs and fixed-income annuities gets you away from the volatility of the markets, but eliminates the upside potential of stocks and bonds and increases the risk that the portfolio's yield doesn't keep pace with inflation.

It's a good idea to establish a fund of safe, liquid money market investments to meet your expected living expenses for the next two to five years. In general, the less worried you are about being able to meet these expenses, the fewer years' worth of expenses you'd want to have invested in these money market investments. With that part of the portfolio safely allocated, you can focus on investing the balance in a way that looks toward the twin goals of preserving principal while protecting purchasing power.

If your investment portfolio is in meltdown and you can't figure out how you're going to make ends meet, you may want to consider a Home Equity Conversion Mortgage, or HECM, also known as a reverse mortgage, as a financial backstop. These are a last-resort measure for getting funds, but I expect these mortgages to become more popular as boomers retire and explore this revenue source for retirement income.