4. Being Too Conservative With Investments
Many retirees shy away from holding stocks in their retirement account portfolios because they fear losing money in a market downturn. By avoiding stocks, though, they are trading off one risk for another — not having enough growth potential in their portfolio to outpace inflation, Steen said.
Although they are often volatile over short periods, stocks tend to outperform bonds and other conservative investments over long periods, said David Walters, a certified financial planner and portfolio manager with Palisades Hudson Financial Group’s Portland, Ore., office.
“Retirees need to understand that the period of their retirement can be upwards of 30 years, and they need their portfolio to support them throughout this entire period,” he said. “So, while it is important to keep the risk of the portfolio in check, some allocation to stocks is warranted.”