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6 steps to retirement

Retirement » 6 Steps To Retirement

Step 3: Rethink your asset allocation strategy
Step 3: Rethink your asset allocation strategy © Ryan R Fox/Shutterstock.com

Is your investment portfolio aggressive enough to stay ahead of inflation over the next 30 years?

Or is it too aggressive such that if there were another severe market crash, you wouldn't have time to recover?

"Resolving this question is really the crux of the matter," says Jerry A. Miccolis, principal and CIO at Brinton Eaton, a wealth management firm in Madison, N.J., and co-author of "Asset Allocation for Dummies."

Tilting your portfolio to be either aggressive or conservative is achieved through asset allocation.

"The more your portfolio is allocated to stocks versus bonds, the more aggressive it is," says Miccolis. "Equities are the growth engine -- what helps keep portfolios ahead of inflation. Bonds keep portfolios stable and help protect against stock market crashes."

Other inflation hedges include Treasury inflation-protection securities, master limited partnerships and real estate investment trusts, says Dan Kern, president and CIO of Advisor Partners in Walnut Creek, Calif. "These should … supplement your core portfolio of stocks, bonds and cash."

Investments should be carefully chosen based on your risk tolerance, investment objectives, liquidity needs, tax bracket, and whether your assets are tax-advantaged or not, says Dunne. Liquidity is especially important as you begin taking distributions from your retirement assets.

Commit yourself to reviewing your investment plan at least annually.

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