Which change is commonly recommended as you approach retirement?

• A. Move toward more aggressive investments with more stocks.
• B. Shift entirely to cash equivalents.
• C. Move toward more conservative investments with more bonds and fewer stocks.
• D. Invest exclusively in real estate.

Answer: (C)

As retirement nears, the goal shifts from maximizing growth to protecting assets and ensuring stable income. Moving toward more conservative investments means a larger portion in bonds and fewer in stocks. Bonds tend to be less volatile than stocks and can provide predictable income, helping to cushion withdrawals during market downturns. With a shorter time horizon and the need to fund living expenses, reducing exposure to the swings of the stock market lowers the risk of a large drop just when you’re withdrawing money.

Relying entirely on cash equivalents isn’t practical because while it reduces risk, it often doesn’t keep pace with inflation and can leave you with insufficient returns to meet living costs over time. Focusing exclusively on real estate introduces liquidity and market risks and makes the portfolio less diversified. A balanced, more conservative mix preserves retirement assets while still offering some growth potential, which is why this shift is commonly recommended as you approach retirement.