RobertPowell

If you haven’t asked this question, you will. Is it time to take your chips off the table? With the major stock market indexes close to all-time highs, now seems as good a time as any to walk away from the table, especially if you are back to where you were in 2008.

The answer truly depends on your personal circumstances, but also on who you ask. To be fair, it’s not quite like the old joke about asking five economists for an opinion and getting six answers, but it’s pretty darn close. In fact, the experts we spoke with offered up recommendations ranging from sell everything to do nothing. Here’s a recap of their advice.

Sell, sell, sell

Stephen Chen, the founder of NewRetirement.com, thinks now might be the time for retirees to consider selling. “If someone has remained invested through the downturn, then it probably makes sense for them to sell some of their stocks into this rally and rebalance according to their needs, especially someone around retirement age who has less time to ride market ups and downs,” said Chen.

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The caveat, however, is this: Ideally retirees have a good understanding of their minimum retirement income needs and have identified the sources that will guarantee that income (Social Security, pension, annuity, bonds, dividends, drawdown strategy, and the like). “Once retirees have a plan for their core income needs, they can take more risk with their remaining assets,” Chen said. “Investors should be rebalancing their portfolios annually so that if they have a run-up in one portion (equities, for example) they can rebalance to maximize their risk adjusted returns.” Read more at NewRetirement.com.

What the heck are you doing the stock market anyway?

You might not call it the sell-everything approach, but one camp suggests that no matter what the stock market is doing or has done, you shouldn’t be investing in risky assets to fund your retirement, unless of course you’ve already got your future expenses covered with safe, reliable streams of income.

Instead of investing in stocks, this camp suggests that you invest in Treasury Inflation Protected Securities (TIPS), or zero coupon bonds, or income annuities as way to fund your desired standard of living.

To be sure, selling all your stocks all at once to follow this strategy might be a shock to the system. So consider ways to ease into it. Reduce, over time and steadily, the percentage you have in stocks while increasing the percent you have in, best case, inflation-adjusted income-producing assets. Consider, too, reading “Risk Less and Prosper” by Zvi Bodie and Rachelle Taqqu if this approach appeals to you.

Try product allocation

Others, meanwhile, say that just because the stock market is at all-time highs doesn’t mean you should take your chips off the table. But they do recommend allocating your assets across products and investments, not just risky assets.

“My fundamental belief is that retirees and pre-retirees should pursue a preset allocation strategy rather than take some chips off the table,” said Garth Bernard of Sharper Financial Group. “Taking chips off the table or changing the asset allocation mix in response to the market situation is de facto ‘market timing’ and it has been demonstrated to be one of the least productive and riskiest approaches to retirement investing.”

Because of the potential length of time spent in retirement and because there is a tendency to drawdown the assets, retirees and near retirees show use a balanced produce allocation with perhaps as much as 40% to 50% in a diversified holding of stocks, said Bernard.

The key to managing assets in or near retirement, according to Bernard, is what he calls the “tossed-salad approach.”

Allocate a portion of the assets to a balanced investment approach, allocate a portion of the assets to an insured-withdrawal approach, and allocate some to insured future guaranteed income such as long dated annuitized payments. “Like a tossed salad with a mix of vegetables of various colors, some that grow above the ground and some that grow below the ground, plus a dash of fruit, such an approach will be good for one’s financial health in retirement,” said Bernard.

Set aside up to three years of living expenses

Others also say the recent gains in the stock market does provide a good excuse for revisiting and rejiggering your investments. But Ross Levin, the founding principal and president Accredited Investors, advocates using what some might call a two-bucket or a best-of-two worlds approach. His recommends setting aside up to three years’ worth of cash in an online saving accounts and then investing the rest in a portfolio where stocks might represent anywhere from 40% to 80% of assets.