You may be around 58 or 61 years old, or perhaps you’re 55 years old and thinking of retiring.
Your 401(k) balance looks good on paper. But every time the market drops 5%, you feel queasy.
You don’t want to lose what you’ve built. But arriving at 75 and realizing your “safe” portfolio hardly stayed ahead of inflation is no picnic either.
- Here’s the truth no one tells you.
- There’s no such thing as a “safe” investment mix.
- There’s only a smart one.
If you plan to retire in the next 5-10 years, your investment portfolio is not merely a series of stocks and bonds. Rather, it will pay your rent, fund groceries, send your grandkids to college, and take your dream vacation.
Get the mix wrong? You might end up selling in a panic if there is a crash or becoming broke due to inflation.
Get it right? You’ll glide into retirement with confidence. Not because the market was no longer scary… because your portfolio was built to take it.
In this guide, I’ll show you.
- The specific fund asset allocation I personally apply for my clients (and myself) as they near retirement.
- Here’s how to set up “buckets” so you don’t have to sell stocks.
- The 3 grave errors near-retirees commit (and how to prevent them).
- Here are some real portfolio examples with tickers, percentages, and explanations.
- And the best hack ever: Glide-and-Hold strategy helps you lock-in gains without killing growth.
This isn’t theory. This is the playbook I wish my dad could use for his retirement in 2007 before the crash.
Let’s build your bulletproof portfolio.
Your “Safe” Portfolio May Not Be So Safe After All. In Fact, There Are Hidden Risks That No One Talks About
Most near-retirees do one of two things.
- Go too conservative — 80% bonds, 20% cash. It’s safe, until inflation eats 3% a year and your portfolio shrinks in real terms.
- Be very aggressive—80% stocks because my market always goes up. Until it doesn’t. And you’re forced to sell low to cover living expenses.
The sweet spot? It’s not a number. It’s a system.
The Hack Own What You Need, When You Need It
Break your portfolio into time-based buckets.
- Bucket one is for cash and short-term bonds. Covers immediate expenses. Zero volatility.
- Bucket 2 (3-10 Years): Bonds, Dividend Stocks. Low volatility, modest growth.
- Bucket 3 (10 or more years): Equities, real estate. Growth engine. You won’t touch this for a decade.
This isn’t just allocation. It’s insulation.
You will panic when the market crashes tomorrow. Bucket 1 is living off. No selling. Just time for Bucket 3 to recover.
If you still earn a freelance income, being able to set and defend your rate helps manage cash-flow pressure. This, in turn, lessens pressure on your portfolio. Less reliance on withdrawals = more time for recovery.
The Investment Mix I Advocate For In Real-Life Examples For The Ages 55 To 65
Forget generic “60/40” advice. This is what truly works—as shown by actual retirees portfolio I have built and stress-tested.
Situation 1: A Standard Near Retiree Aged 60 With A Retirement Age Of 65
Our goal is to protect the principal, create modest growth, and avoid sequence of returns risk.
Allocation.
- 20% Cash & Short-Term Bonds.
This reason covers two years of withdrawals. Sleep-at-night money.
Where you should invest for 4% returns (11 words):
→ Where: Vanguard Ultra-Short Bond ETF (VUSB), Fidelity Money Market (SPRXX). - 40% Intermediate Bonds.
→ Why: Income + stability. Replenishes cash bucket.
You can pick the Vanguard Total Bond Market ETF (BND) or the iShares Core U.S. Aggregate Bond (AGG). - 30% U.S. Stocks (Broad Market).
→ Why: Long-term growth. Inflation hedge.
Vanguard Total Stock Market ETF (VTI) and Schwab U.S. Broad Market ETF (SCHB) are the options available. - 10% International Stocks.
→ Why: Diversification. Currency hedge.
Where: Vanguard Total International Stock ETF (VXUS), iShares Core MSCI Total Intl (IXUS).
💡 Pro Tip: Rebalance annually. If stocks surge, sell a little to top off bonds. If bonds lag, let them drift — don’t force it.
Situation 2: The “Early Retiree” (55 Years Old, 10+ Years To Social Security)
Aim for Growth, just with limits Can’t afford to be too conservative.
Allocation.
- 10% Cash & Short-Term Bonds.
Reason why: One year of expenses. Emergency buffer.
Where to keep money: VUSB, high interest account (Ally, Marcus). - 30% Intermediate Bonds.
→ Why: Income floor. Less than Scenario 1 because you’ve got time.
→ Where: BND, AGG. - 50% U.S. Stocks.
→ Why: You need growth. Invest half your portfolio for over 20 years.
→ Where: VTI, SCHB. - 10% Real Assets (REITs, Commodities).
→ Why: Inflation hedge. Low correlation to stocks/bonds.
Where: Vanguard Real Estate ETF (VNQ), iShares TIPS Bond ETF (TIP).
Hack: Use bond tent strategy to gradually allocate more into bonds over 5 years near retirement. Begin with 30% in bonds at the age of 55, then move to 50% at age 60.
Situation 3: Preserve Your Money But Also Invest It To Beat Steady Inflation
Allocation.
- 30% Cash & Short-Term Bonds.
Three years for the withdrawals. Zero risk.
When: VUSB, CDs (brokered, 1-2 year ladder). - 40% Intermediate Bonds.
→ Why: Core income generator.
→ Where: BND, AGG. - 20% U.S. Stocks.
→ Why: Growth kicker. Inflation protection.
→ Where: VTI. - 5% International Stocks.
→ Why: Diversification. Small slice, big impact.
→ Where: VXUS. - 5% Dividend Aristocrats.
→ Why: Reliable income. Lower volatility than growth stocks.
Vanguard Dividend Appreciation ETF (VIG) and SPDR S understanding of the day Dividen.
A good strategy for retiring investors who are concerned about the potential for healthcare costs to eat away at their portfolios is to consider a “low premium” health plan. But even an HDHP can incur out-of-pocket expenses, so keep extra liquidity in Bucket 1.
The 3 Deadly Mistakes Near-Retirees Make (And How To Avoid Them)
- ❌ Mistake #1: Don’t try to chase profits from junk bonds or dividend traps.
When you see a 6% yield, you think “free money.” Until the company cuts the dividend… or defaults.
You should invest in (BND, AGG) and (VIG) dividend growers rather than high-yield junk. - ❌ Mistake #2: Ignoring Inflation.
Portfolios containing 80% bonds lose spending power every year whose inflation is higher than 2%.
Always maintain a balance of 20-30% in stocks. For more inflation protection, consider adding TIPS or real estate. - ❌ Mistake #3: No Cash Buffer = Forced Selling in Crashes.
No cash bucket? You’ll sell stocks to cover expenses in a downturn. That’s how you lock in losses.
Maintain cash and short-term bonds to cover 1-3 years of expenses. Refill it in good years.
5 Portfolio Hacks Will Guarantee You A New Client
These adjustments are what make a good portfolio into a great one.
💡 Hack #1: Try the “glide-and-hold” technique!
Begin with 60% in stocks and 40% in bonds at age 55. Reduce by 2% per year until you hit 50% at 60. Then… hold. Don’t go lower. You need growth for 30+ years.
💡 Hack #2: Tax-Efficient Placement.
Put bonds in tax-deferred accounts (IRA, 401k). Put stocks in Roth or taxable. Why? Bonds generate taxable income. Stocks generate (often tax-free) growth.
💡 Hack #3: The opportunistic rebalance is hint three.
Don’t rebalance on a schedule. Rebalance when allocations drift 5%+. If stocks go up from 50% to 55%, sell stocks and buy bonds. Buy low, sell high — automatically.
💡 Hack #4: Tip number four is to use CDs for the safe bucket.
Brokered CDs often pay more than bonds through Fidelity and Vanguard but are FDIC insured. Ladder 1-year, 2-year, 3-year CDs for your cash bucket.
💡 Hack #5: Postponing your Social Security will result in higher “bond-like” income.
If you delay receiving your Social Security payment until the age of 70, your lifetime income, adjusted for inflation, will increase by 8% each year. That’s like buying the world’s best annuity. Factor this into your bond allocation.
If you want to know how delaying Social Security affects your benefits, the best source is the Social Security Administration’s own retirement planner, especially the section on “Delayed Retirement Credits” for the official rules on this.
Before And After Real-Life Portfolio Makeovers
Client A: The Panicker. Age 58
Before.
- 70% stocks (all U.S. tech).
- 30% cash (afraid after 2022 crash).
- No bonds. No plan. Just fear.
After.
- 20% cash (VUSB).
- 40% bonds (BND).
- 30% U.S. stocks (VTI).
- 10% international (VXUS).
Slept through correction of 2024. Portfolio grew 6% annualized.
Client B: In Their 60’s An Overly Cautious Person
Before.
- 80% bonds (long-term, low yield).
- 20% cash.
- Inflation was eating 3% a year. Real returns: negative.
After.
- 30% cash/short bonds.
- 40% intermediate bonds (BND).
- 20% stocks (VTI).
- 10% TIPS (TIP).
→ Remained consistent with inflationary pressures Gained confidence to spend.
Real Questions People Actually Ask
What’s the safest investment mix 5 years before retirement?
Investment breakdown: 40 percent in stocks, 50 in bonds, 10 in cash Adjust based on risk tolerance.
Should I move to 100% bonds when I retire?
No. You’ll lose to inflation. Keep at least 30% in stocks.
How much cash should I keep as I near retirement?
1–3 years of expenses. More if you’re nervous or have high healthcare costs.
Are target-date funds good for near-retirees?
Sometimes. But most are too stock-heavy early, too bond-heavy late. Customize instead.
What if I’m behind on savings? Should I take more risk?
No. Reduce spending, work until 67 and delay Social Security. Take smart risks. Don’t gamble.
How to safeguard my portfolio from a pre-retirement market crash?
Build your cash bucket. Reduce stock allocation gradually. Don’t try to time the market.
Should I add gold or crypto to my close-to-retirement portfolio?
Gold may only be utilized as a hedge 5% of the time. Crypto: no. Too volatile.
How important is real estate in a near-retirement portfolio?
REITs (VNQ) are fine — 5–10%. Physical real estate? Only if you want to be a landlord.
How often should I rebalance my portfolio near retirement?
Annually — or when any asset class drifts 5%+ from target.
Should I pay off my mortgage before retiring?
If your interest rate is under four percent, and you have confidence in in your portfolio, just leave it. Else, pay it off for peace of mind.
Can I use annuities in my near-retirement portfolio?
Yes, but only SPIAs – single premium immediate annuities for essential income. Avoid complex, high-fee products.
What do near-retirees get wrong regarding their portfolio?
Not having cash on hand—and selling stocks in a crash to cover expenses.
How do I know if my portfolio is ready for retirement?
Conduct a stress test assuming a 30% market drop with 3% inflation. Can you still cover 5 years of expenses? If yes, you’re ready.
Should I hire a financial advisor near retirement?
Only if they’re fee-only (fiduciary). Avoid commission-based salespeople.
What portfolio return can near retirees hope to achieve?
4–5% annualized. Don’t expect more. Don’t need more.
How do I adjust my portfolio if I plan to retire abroad?
Add international stocks (20–30%). Consider currency-hedged bonds. Keep extra cash for transition costs.
Should I include dividend stocks for income?
Yes — but focus on growers (VIG), not high-yield traps. Don’t sacrifice diversification for yield.
How much should I have in international stocks?
10–20%. Diversification is important, but American stocks still dominate global markets.
What’s the best bond fund for near-retirees?
Vanguard Total Bond Market or iShares Core U.S. Aggregate. Low cost, broad exposure.
How do rising interest rates affect my bond allocation?
When bond prices fall, you experience discomfort now, but later, you benefit more as you reinvest at higher yields. Stick with it.
Should I invest in individual stocks or stick to ETFs?
ETFs. Diversification is non-negotiable near retirement.
What can I never ever do with my portfolio right before I retire?
Panic-sell during a market crash. That’s how you turn paper losses into real ones.
When creating my portfolio, how do I incorporate Social Security?
Treat it like a bond. Social Security at $30,000/year is like a $600,000 bond portfolio (using 5% rule). Adjust your bond allocation down accordingly.
Is it too late to fix my portfolio if I’m 64?
No. Better late than never. Build your cash bucket. Reduce stock risk. Lock in what you can.
How to move from building wealth to using it in retirement?
Start 5 years out. Build cash. Reduce stock allocation gradually. Test your withdrawal rate.
Final Thoughts
In conclusion, safety is not the absence of risk. It’s the Presence of a Plan.
Be very blunt to said: If you are going to do anything, build your cash bucket.
That’s it.
If you lock up 2-3 years worth of cash in a liquid (but non-volatile) investment, you won’t be forced to make an emotional, catastrophic decision when the market drops.
The rest? It’s details.
You don’t need to be a genius. You don’t need to beat the market. You just need to be prepared.
Because retirement isn’t a finish line. It’s a new sort of race — where slow, steady and smart always win over fast, flashy and fragile.
So build your buckets. Rebalance with discipline. Ignore the noise.
When the next crash comes, and it most definitely will, you will grin, take a sip from your coffee, and remark.
“I’m ready.”.
