Retiring with no plan for income
Retirement is a gradual process that involves some planning. Ideally, people begin to transition their portfolio into retirement mode years before they actually hang up their working hats.
"I think that households lose sight of what the end purpose of this entire exercise is. The end purpose is to generate income in retirement, not to accumulate wealth," says Webb.
Throughout their career, workers have lots of time to squirrel away money and wisely invest in a range of assets. As retirement nears, the mix of investments needs to change, moving away from growth in accumulation toward a distribution and preservation stage.
"They need to rebalance their portfolio to make sure their risk tolerance is reflective of their age and timeline to retirement," says Nancy Coutu, Certified Financial Planner professional and principal of Money Managers Financial Group in Oak Brook, Ill.
That usually means scaling back equity exposure and increasing the amount of bonds in the portfolio.