If you are nearing retirement, how should your asset allocation typically shift?

• A. Move toward more aggressive investments (more stocks).
• B. Shift entirely to cash.
• C. Move toward more conservative investments (more bonds, fewer stocks).
• D. Invest more in international growth funds exclusively.

Answer: (C)

As you approach retirement, the goal of your portfolio shifts from growth to protecting what you’ve saved and providing steady income for living expenses. The closer you are to needing the money, the more important it is to reduce the risk of a big market drop that could undermine your retirement plan. Bonds are generally less volatile than stocks and can provide more predictable income, so increasing their share helps preserve principal and smooth out portfolio returns during withdrawal years. Keeping a larger portion in stocks can still offer growth, but the higher volatility can threaten the ability to fund retirement if a downturn coincides with spending needs. Cash entirely isn’t ideal either, because then inflation erodes purchasing power over time. Investing exclusively in international growth funds ignores the benefits of diversification and can add currency and regional risks without addressing the need for income and stability. So, shifting toward more conservative investments—fewer stocks and more bonds—best aligns with retirement needs by balancing growth with protection.