Money Sense: 5 Rules for Investing in Retirement

Managing your portfolio with new risks and priorities in mind takes careful planning and regular monitoring. Here are tips from Merrill on how to get started.

Heads up: Investing in retirement is not the same as investing for retirement. All the smart strategies you used to accumulate enough for retirement will likely need adjusting as you enter the next chapter of your life.

Think of it as a shift in perspective from investing for the really long term to being much more prepared for shorter-term risks. “If anything, investing in retirement is a bit more complex, given the variety of potential risks and uncertainties,” says Anil Suri, a managing director in the Chief Investment Office (CIO) for Merrill and Bank of America Private Bank.

So where do you begin? It can start with a thorough portfolio review with your advisor, ideally at least three years before you retire. After you retire, plan to revisit your portfolio quarterly and keep these five investing guidelines in mind.

1. Review your asset allocation with new risks in mind.

In mid-career, you could afford to be aggressive with your portfolio. When you are drawing down those assets after you retire and have less time to recover from market drops, a more conservative approach may make sense. Still, being too conservative heightens the risks of outliving your money and failing to keep pace with cost-of-living increases. Consider that even a modest annual inflation rate of 2.5% would erode the spending power of a dollar by 46% over a 25-year period, according to calculations by the CIO.

Ask your advisor whether your current fixed income and dividend stock investments are sufficient to supply you with the income you will need, given the potential for inflation and market volatility. Will your current asset allocation provide enough potential growth to cover another 20 years or more? Finding the right balance for your personal situation is key.

2. Prioritize your immediate cash needs.

If your noninvestment income (Social Security, a pension, income from a part-time job) covers all or most of your essential expenses — healthcare, housing and so on — you can take on more investing risk. If not, you may want to have more of your investments in lower-risk assets, such as U.S. Treasuries, high-grade corporate bonds or annuities.

“You want a high level of certainty around the investments that are supporting your essential lifestyle,” Suri says. “Beyond that, you need to pursue more growth.” Keep in mind that you may end up spending more than you anticipated in retirement. Some 45% of retirees report spending more than they had expected, according to the 2025 Retirement Confidence Survey from the Employee Benefits Research Institute and Greenwald Research[1].

3. Do not abandon stocks.

While stocks are susceptible to short-term price swings, they also give you the best chance of staying ahead of inflation and helping your money last. While you may have previously felt comfortable with an aggressive equity allocation, you and your advisor could now find that a more balanced allocation, say 50% to stocks and 50% to bonds, offers the greatest likelihood of providing you with the growth you need, according to the CIO. An all-cash portfolio leaves you at greater risk of running out of money.

4. Prepare for volatility, especially early in your retirement.

Volatility can be especially damaging early in retirement. When you are investing for retirement, you are likely contributing regularly to your retirement plan. Once you retire, however, you are not only withdrawing funds, but you are also no longer making fresh contributions.

You need to guard against what is called sequence of returns risk. It is what happens when a steep market drop in the first few years of retirement forces you to draw down stocks at depressed prices. Withdrawing more than you had intended could have an outsized impact on your remaining wealth. Having cash and short-term bonds on hand can help you navigate down markets, says Nevenka Vrdoljak, a managing director in the CIO. “Adding more guaranteed income could also help minimize sequence of returns risk,” she adds.

5. Stick to your plan — and review it regularly.

Creating a solid retirement investment strategy is one thing. Sticking to it is another, and our emotions can sometimes cause us to act too hastily when markets get volatile, particularly in retirement. In fact, because investors tend to buy and sell at inappropriate times, their actual returns often lag the overall market.

An advisor can help you avoid emotional mistakes, and reviewing your plan regularly with your advisor can also help you feel more in control. “One of the greatest threats to a secure retirement is the failure to have a plan,” Vrdoljak says. Developing a retirement investing plan — and sticking to it — may be the most important rule there is.

Investing involves risk. There is always the potential of losing money when you invest in securities.

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The Chief Investment Office (CIO) provides thought leadership on wealth management, investment strategy and global markets; portfolio management solutions; due diligence; and solutions oversight and data analytics. CIO viewpoints are developed for Bank of America Private Bank, a division of Bank of America, N.A., (“Bank of America”) and Merrill Lynch, 126 Pierce, Fenner & Smith Incorporated (“MLPF&S” or “Merrill”), a registered broker-dealer, registered investment adviser, Member SIPC and a wholly owned subsidiary of Bank of America Corporation (“BofA Corp.”)

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For more information, contact Merrill Lynch Financial Advisor Kris McKoin of the Merrill Lynch Wealth Management office at 1809 Glenmar Ave, Monroe, LA 71201 or T 318.329.3001, C 318.821.2544

[1] EBRI and Greenwald Research, “2025 Retirement Confidence Survey,” 2025.