Stocks You Should Sell Before Retirement To Save A Ton Of Money

Transitioning into retirement is an exciting and potentially scary time in a person's life. With the exit from the workforce looming, there's a major change of both lifestyle and pace. A newly freed up calendar can make for much needed relaxation and free time, leaving you with far more time for things like going out for a walk, hitting the golf course, or going fishing. In retirement, many people expand their hobbies or even take on new ones in pursuit of a life that's focused on enjoyment rather than obligation.

However, to get here, you'll need to start saving early. In fact, it's best to begin your retirement savings journey some time in your 20s. Building a portfolio filled with strong performers that steadily ramp up your principal value should be the primary goal as you continue to work and save. Then, once you enter your 60s you'll begin thinking about when to stop working for someone else – your Social Security benefits max out at 70, so most people will want to make their egress by the end of these years. This comes with numerous changes, one of which is the makeup of your investment portfolio. As you age, restructuring your holdings to support greater stability — that can outlast short term dips — becomes increasingly important. However, as you enter retirement, one large scale change in particular is necessary: pivoting out of high risk assets.

The volatile stocks in your portfolio serve a purpose in your younger years. These risky assets offer upside potential that can skyrocket the value of your investments. Most people in the early stages of their career will want to invest in a handful of volatile stock assets in an effort to supercharge their retirement accounts. If an investment pays off, you may find yourself well ahead of the game — for instance, by the time you turn 50, you'll want to have saved at least three times your annual salary. Of course, in a volatile investment there is always a risk that it won't pay off, and an added threat that the company will simply go bust in more extreme circumstances.

These risks are simply not conducive to late-stage retirement investment strategies. As you draw closer to your retirement date, pivoting out of risky stock investments is a core part of sound investment management. While losing it all might not matter as much in your 20s, it matters a whole lot at 65 as you approach full retirement age. The closer you get to retirement, the less appetite you'll generally have for risky investment decisions. Instead, sell off these assets in increasing volumes as you age and pivot into safer alternatives. This might still be in the stock market, but it can equally be shifted out of stocks entirely and placed in bonds or even as a cash asset in a high yield savings account.

Beyond the stock market itself, another investment that you'll want to reconsider as you prepare for retirement is your life insurance coverage. It's typically a bad idea to invest in additional life insurance products as you prepare to leave the workforce. At this stage in life, coverage can be prohibitively expensive. This is especially true for those already suffering from underlying health conditions. The reality is that the older you get the more expensive your life insurance premiums will become on a new policy. While investing in specific insurance offerings that cover burial expenses and other end of life necessities could be important to some, there will typically be better alternatives available to most retirees.

Another important feature of the life insurance arena to consider is whether or not it makes sense to sell your policy rather than continuing to pay premiums. A settlement offer can be a great way to cash out of a policy that you've continued to pay into over the years but no longer need. In many instances, younger workers will take out a life insurance policy to protect their spouse and children in the event that they can no longer provide financially for the family. But this might not be a priority as you get older, and keeping up with the premiums can end up feeling like a hindrance rather than a backstop especially if your children have moved out, or you've navigated past important financial hurdles like paying off your mortgage.

One stock option that can be a valuable, potential addition to your portfolio is a type of fund that focuses on a specific asset. REITs trade in the market as if they were any other stock. However, these assets bundle together physical real estate properties rather than shares of companies. The result is an investment in a broad spectrum of property holdings that can be significantly beneficial to retirees seeking to provide income replacement. REITs generally offer dividend payout yields that far exceed typical company stock selections. They have to follow specific rules that propel this trend, including a dividend payment to shareholders valued at or above 90% of the fund's taxable income.

While real estate can similarly be valuable to your portfolio, channeling your investment through protected avenues is usually your best approach. Many people will invest in physical real estate of their own as they continue working toward retirement. Managing a rental property can deliver routine monthly income that can dilute or even entirely make up the monthly mortgage payments that you owe on the property. However, real estate is a volatile investment area that retirees often don't have the ability to fully navigate. There's a human element to property ownership that simply doesn't exist elsewhere. Unless you have the stomach to deal with this volatility, and the day-to-day management of physical real estate, selling an investment property you own and pivoting away from investments that require active management can be a valuable approach.