Investing for retirement is like going on a long road trip. At first, it seems like you're not making any progress at all. But once you get going, the miles fly by. When you get where you're going, it feels strange to no longer be flying down the highway at top speed.

Similarly, as you get close to retirement, your attitude toward money changes a lot. After spending most of your career investing aggressively in stocks and other high-risk, high-return investments, you'll have to think a little differently during your pre-retirement years. It's crucial to take on some new tasks during the three to five years before you retire.

One of those shifts involves changing your investment strategy. Instead of focusing on doing whatever it takes to build up your nest egg as quickly as possible, you'll need to use those last few years to start gathering the cash you'll need to cover your living expenses after you retire.

You need income
The most difficult adjustment you'll have to make when you retire is losing your paycheck. That source of ready cash every month has kept you from having to tap your investment portfolio over the years, letting you buy stocks aggressively for the long term in order to maximize total return. But once you retire, you'll need to replace at least a big part of that income.

The problem is that many of the stocks you own probably don't provide much income. Take a look at these stocks with good track records:


5-Year Average Return

Dividend yield

Mosaic (NYSE:MOS)





Cabot Oil & Gas (NYSE:COG)






Polo Ralph Lauren (NYSE:RL)



Source: Yahoo! Finance.

As you can see, many stocks that focus on growth don't pay dividends at all. Others pay only a pittance. That's not going to help you get your bills paid.

Where to get investment income
There are plenty of ways you can branch out to get more income from your portfolio. If you've been using target retirement funds, you probably already have some of your money allocated to bonds. But with interest rates already low, bonds won't be enough to take the place of your income, either.

Some stocks pay sizable dividends that can provide income. But you have to be smart about high-dividend stocks to make sure those payouts won't disappear. Companies like Wells Fargo (NYSE:WFC) and General Electric (NYSE:GE) have had to slash dividends. Real estate investment trusts have faced similar challenges. They won't provide the whole solution by themselves.

How much you need
The easiest way to generate the cash you'll need in retirement is to liquidate some of your investments in advance. That way, you don't have to worry about whether the market will go against you right when you need to sell. Aim to raise enough cash to pay for several years of expenses, but do so gradually during the last few years of your career. That way, market ups and downs should average out to give you a favorable sale price for your stocks and funds.

When you're figuring out how much cash you'll need, make sure to account for the regular income you'll have, both from your portfolio and from other sources like Social Security and pension payments. That way, you won't have a cash cushion that is too big, and will be able to keep more money invested in assets that will keep growing.

While getting used to the idea that you're about to retire may take some work, it's great when you have the finish line in sight. With just a few simple adjustments, you can get your finances ready to retire with you.

For more on getting your retirement savings in order, check out our Rule Your Retirement newsletter. A free 30-day trial will give you everything you need to get started.

This article was originally published on Jan. 3, 2008. It has been updated by Dan Caplinger, who owns shares of General Electric. Google is a Motley Fool Rule Breakers selection. is a Motley Fool Stock Advisor pick. Try any of our Foolish newsletters today, free for 30 days. The Fool's disclosure policy is always working for you.