People have too much exposure to stocks and stock funds, which are attractive long-term investments but can fluctuate significantly. Retirees should lower risk with bonds, cash, or CDs.
It's essential to avoid sequence of returns risk, particularly negative market returns late in your working years or early retirement, as market downturns can severely impact your savings.
If you retired at the end of 2008 and were invested solely in the S&P 500, your assets fell nearly 40%, illustrating the importance of having a diversified strategy.
Signs your 401(k) is too aggressive include frequent fluctuations in your balance and constant worry about performance, which indicates a need for more stable investments.
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