Deep Dive: Are you nearing retirement? Here’s how to transition your portfolio from growth to income.

by | Feb 24, 2023 | Stock Market

Over the decades, perhaps you’ve been very good at saving your money and investing it for long-term growth. But when the time comes for you to stop working or to step back to a part-time job, you might need to shift your focus. It is time to think about income. When you were decades away from retirement, you may have leaned toward a portfolio that was mainly invested in the stock market. This was a good strategy: According to FactSet, the benchmark S&P 500
has had an average annual return of 9.88% over the past 30 years, with dividends reinvested. Nearly 80% of stocks in the S&P 500 pay dividends, and reinvestment is a core element of the compounding that has made stocks such a reliable vehicle for long-term growth.

Investing in the S&P 500 is simple, too, by purchasing shares of the SPDR S&P 500 ETF Trust
or other index funds that track the benchmark. There are many similar funds, and plenty of them have very low expenses. Of course, a long-term growth investor whose portfolio is mainly invested in the stock market needs to resist the temptation to sell into declining markets. Attempts to time the market tend to lead to underperformance when compared with the S&P 500, because investors who move to the sidelines tend to return too late after a broad decline has been reversed. And brutal declines in the stock market are typical. It’s not uncommon for the market to fall by 20% or even more. But through it all, that 30-year average return has remained close to 9.9% — and if you look even further back, that average return has been nearly the same.Your life has changed, and you need income Now imagine that you’re 60 years old and you …

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