With so much talk of recession, many retirees I talk to are in total panic and fear that they will run out of money during retirement. Take a breath, slow down and carefully assess your time horizon for when you'll actually need the money. Many retirees are living 20 to 30 years in retirement, so they need to have stocks in their portfolio -- even if the market is extra risky right now.

Cash equivalents and bonds will not have enough growth to offset inflation. So unless you have enough cash already saved to live on until you die and you don't need that cash to grow to keep up with inflation, you should have a portion of your portfolio in stocks.

How do you assess how much should be in stocks, how much in bonds and how much in cash equivalents? That's a difficult question to answer. If you haven't already figured that out given your current financial picture, I strongly recommend you sit down with a Certified Financial Planner now. I recommend that you find a fee-based planner and not a planner who will earn commissions based on what they recommend. If you don't know a good planner, search for one in your area at the Financial Planning Association.

Keep assets in cash that you need in the next two years. For safety and to avoid being forced to sell holdings at a loss just because you need cash, always be certain that you have at least two years of your cash requirements in the most liquid types of holdings -- money market funds, CDs or savings accounts. With these types of holdings, you never have to worry if the country slips into a recession. As you figure out how much cash you need, consider monthly income such as Social Security benefits, pension benefits and other income you know you can count each month.

Move assets to bonds that you'll need in three to five years. Bonds are safer than stocks, but can still lose value as interest rates fluctuate. So move money you're holding in stocks or stock mutual funds to bond or bond mutual funds that you know you'll need in three to five years. If you're holding more cash than you'll need in the next two years, you may want to move that cash into bonds or bond mutual funds to get a better return than you can get on cash equivalents such as CDs, money market funds or savings accounts.

Look to safe, income producing stocks and stock funds for holdings you'll need in five to 10 years. Cash that you think you'll need in five to 10 years should be in the blue chips, utilities, financial stocks (well that's usually the case, although given the current crisis they don't look as good), health care and other types of stocks in companies that pay a steady dividend. They probably won't be growth stocks, but they also won't take a huge hit if we end up in a bear market.

Use growth stocks and stock mutual funds for money you won't need for 10 years or more. You should have some growth in your portfolio or inflation will eat up the money you'll need in the long term. For the money you can invest for a longer term horizon, read my post on what to do with your stocks.

Lita Epstein has written more than 20 books including "Working After Retirement for Dummies." This post is part of a series offering consumers advice on what to do during a recession.


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