SmartMoney Blogs

A blog about living in and planning for retirement

6 Ways to Cope With Imminent Retirement


What do you do now if your retirement is imminent?

First off: Don’t panic. Hitting the “sell” button when the Dow Jones Industrial Average plummets for three weeks in a row could hurt you worse than anything else.

Here’s a quick list of ways you can take action that could help, rather than hurt, based on a Weekend Investor cover story last Saturday, “Which Way to Retirement?”.

Figure out how much you really spend, rather than guessing at what you’ll need in retirement. Financial planners say this is the biggest mistake that people make in retirement planning. And don’t count on your spending falling much. Some people spend more as they tackle household projects or new interests. You can track your expenses free of charge on sites such as Intuit Inc.’s

Pinpoint your real risk tolerance. Words like “conservative” and “aggressive” are subjective. Thom Hall, a CFP in Midvale, Utah, recommends taking an online risk-tolerance survey at, which costs $45 for individuals. Then you can see if your risk tolerance matches your investments.

Keep the money needed to cover one year’s worth of expenses (after Social Security or any pensions) in cash. At the moment, FDIC-insured money market accounts are yielding at least as much, if not more, than money market mutual funds with no insurance, so CFPs are putting their clients’ money there.

Consider keeping a second year’s savings in a bond fund with a one-year maturity.  Options include as the Pimco Enhanced Short Maturity Strategy Fund, says Lane Jones, chief investment officer of Evensky & Katz LLC in Coral Gables, Fla. By socking away two years’ of savings, you have the “psychological benefit” of being able to be more patient with the rest of your investments, he says.

Alternatively, consider investing in an annuity. This will provide payments to cover your “must” expenses after pensions or Social Security. With interest rates so low, you’re probably just as well off investing in a variable annuity with guaranteed benefits as in a single-premium immediate annuity, experts say.

But variable annuities of this type are extremely complex and have fees that run as much as 4.5% of your investment. You’re probably best off hiring a certified financial planner who you pay by the hour, or a fee, rather than shopping on your own.

Consider indexed CDs. If you’re too scared to invest in equities, consider indexed certificates of deposit that are FDIC-insured and are tied to the performance of stock markets. The big risk is that you would have to sell at a discount if you do so before the investment matures.


We welcome thoughtful comments from readers. Please comply with our guidelines. Our blogs do not require the use of your real name.

Comments (0)

    • Be the first to leave a comment on this blog.

About Encore

  • Encore examines the changing nature of retirement, from new rules and guidelines for financial security to the shifting identities and priorities of today’s retirees. The blog also explores news that affects retirement, from the Wall Street Journal Digital Network and around the web. Lead bloggers are reporter Catey Hill and senior editor Jeremy Olshan. Other contributors include The Wall Street Journal’s retirement columnists Glenn Ruffenach and Anne Tergesen; the Director for the Center for Retirement Research at Boston College, Alicia Munnell; and the Director of Research for Pinnacle Advisory Group, Michael Kitces, CFP.