Experts say as you prepare for retirement, keeping your money in stocks is the best choice for ensuring your future. NY1's Tara Lynn Wagner filed the following report.
Let's start with the good news.
"2013 was a great year for stock markets. The S&P was up 20, 22 percent, and international markets also did relatively well," says Jon Stein, founder and CEO of Betterment.com.
That means if you have money in an investment account, like a 401k or IRA, then your portfolio probably got a nice boost. For workers in the home stretch, five to seven years away from retirement, this puts them in an interesting position. How do they protect their newly inflated nest egg from any downturns the market may take?
"We hear that question almost every day in this environment, and I think the answer is, every person is different," says Doug Zarookian, branch manager of the Schwab Park Avenue Investment Center.
Stein says while your gut reaction may be to pull your money out and put it under your mattress "the best thing to do is to stay invested."
That's because even after you retire, your money needs to keep working, in many cases for decades.
"A healthy couple retiring at age 65, I believe there's about a 25 percent chance that one will live to age 90, so you really have to plan to spend a good 25, 30, maybe 35 years in retirement," Zarookian says.
If you're worried about the short term, Zarookian says there are some strategies you can employ.
"One of the things we recommend at Schwab is that people put at least the first 12 months of income that they'll need in a very short-term instrument, like a savings account or a checking account," he says. "They might not get much return on that money but that money would be there for the first 12 months for withdrawals to help them meet their income needs."
While no one can truly predict what the market is going to do next year, let alone 20, there are a few things you can do to help steady your ship. One is to diversify.
"The best thing to do with your money is to invest in a broadly diversified portfolio of stocks and bonds. That's the case 30 years ago and it’s the case today," says Stein.
The other is to sit down with a professional to look at the big picture and build a custom retirement income strategy for your particular set of needs. Having that plan in place is essential because bottom line, according to Zarookian, "Grab the money and run is not an investment strategy."