If I want to retire in 10 years, how should I pick investments?

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Q. My portfolio didn’t do well last year and I am in it for the long haul. I don’t plan to retire for 10 years. I know you should get more conservative as time goes on, but I need more growth so I will have enough for retirement. How should I choose the right investments?
— Investor

A. The stock market has indeed been volatile.

But we’re happy to hear you are in it for the long haul.

Ideally, you should have some sort of financial plan which would give you a better idea of the right investments for your plan, said Michael Gibney, a certified financial planner with Modera Wealth Management in Westwood.

He said the guideline of becoming more conservative as you get older is good in concept but may not necessarily be true for everyone.

A great way to determine how conservative — or not — you can “afford” to be might be borne out by doing a plan, he said.

“Developing a plan, which would include listing your monthly expenses, and increasing these for inflation as time goes by, will enable you to determine the rate of return you need to meet that expense demand,” Gibney said.

He offered this simple example: if the total of your annual expenses is roughly 4% of your entire portfolio you should therefore target a return greater than 4%, which will enable you two “back in” to a proper investment allocation and investment mix.

“The concept here is that you are taking distributions from your portfolio, while enabling the portfolio to continue to grow,” he said.

“This will also help you determine whether or not you need more growth,” Gibney said. “Who knows, the amount of money you have, and will continue to save as you work, may enable you to become more conservative earlier than you think.”

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This story was originally published on Jan. 25, 2023.

NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.