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Retirees Cheer Stock Gains, Weigh Moves

For many retirees, this month’s rally – on course to be the biggest since 1987 – provides a much-needed boost to their nest eggs. But it also raises a key question: What to do next?

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Unlike younger investors, retirees have a shorter time to recover market losses. And with market volatility likely to continue, at least in the short term, there are some steps retirees can take to protect their nest egg. For starters, some retirees, especially those who need cash in the short term, may want to consider taking some gains now rather than waiting, says Michael Markiewicz, a certified financial planner at Fogel Neale Partners in New York City. Those worried about another market dip may also want to shift more of their portfolio from stocks to cash, experts say.

Of course, any gains taken now may have tax implications, so retirees should consider whether their capital losses will be enough to offset capital gains, says Markiewicz.

Sheryl Garrett, a fee-only certified financial planner, says another strategy is to move some of those proceeds from gains into relatively safer investments like money market funds or stable value funds that can help protect principal. But because returns can be low, she recommends this move for retirees who plan to withdraw that money from their nest egg in the near term.

Other advisers are recommending that retirees rebalance their investment portfolios. The market swings of the last quarter have likely thrown the asset allocation on many portfolios out of whack, meaning they might have more exposure to bonds or stocks now than they intended, says Stuart Ritter, a financial planner at T. Rowe Price.

Whatever retirees chose to do next, most experts recommend against increasing their withdrawal rate. In fact, during the past few months, as we’ve reported, many financial planners have advised retired clients to lower the annual percentage of money they take out of their retirement savings from 4% to 2% or 3%. And despite the October rally, these advisers say there’s little reason to up that rate now. After all, there’s no guarantee that this month’s upswing will continue.

Catey Hill contributed to this story.

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    • Take a little off the table. If nothing else it would be rewarding for those who rode the market from Dow 6500 to the present.

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      Do nothing and enjoy the ride

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