Where Should I Invest My Money If I Have Four Years Until Retirement?

Four years before retirement is a good time to rethink your nest egg.

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The closer you get to retirement, the more you worry about where your money is and how to manage it best and the more important it is to determine whether you're really ready to live on your retirement income or need to work longer and invest more. Investing when you're five years or less from retirement is all about making sure you've got your bases covered to ensure that you're well set to enjoy your nonworking years.

Sticking With Safe Bets

As your retirement grows nearer, you're more likely to want to protect your money than invest it aggressively. If you've already maxed out your retirement contributions, have all the insurance you need and still have money to burn, consider putting it in stable, low-risk investments, such as certificates of deposit, annuities or bonds that will mature shortly before or just after you retire. Stagger these investments so they mature or begin to pay out just before or after you retire to help you create an additional income stream to supplement your retirement income.

Redoubling Your Retirement Efforts

If you're confident that retirement is four years away, invest as much as you can afford to in your retirement plan, whether it's an individual retirement account or an employer-sponsored account. Contribute to a 401(k) or deferred compensation plan with your employer if that's an option, as most employers match at least some portion of your contributions to such plans. This increases your investment and reduces your taxable income; contributions to either type of account are made before taxes are taken out of your paycheck.

Insuring Your Future

The years leading up to your retirement are the time to invest in long-term insurance that can protect your retirement income. Long-term care insurance can reduce the risk that a health crisis will deplete your retirement funds. Purchased as a supplement to your health insurance or Medicare coverage, long-term care insurance covers the costs of hospitalizations, rehabilitation or nursing home care that can result from a chronic or devastating illness. Purchasing this insurance while you're still in good health is an investment in your future, as long-term care policies get more expensive as you age.

Rethinking Retirement

Whether you're four years or 14 years from retirement, your best investment move is to make sure you're saving enough to sustain you through your nonworking years. Talk to a financial adviser to make sure you really are four years from a comfortable, secure retirement before you start changing your investment strategy.