Retiring in a Year? Make This Brokerage Account Move Now

If you're about a year away from retirement, you may be starting to count down the weeks until you end your time in the workforce and enjoy the freedom of not having to report to a boss. But it's really important to make sure that the investments you own are suitable for someone who's on the cusp of retirement. So with that in mind, here's an important move to make in your brokerage account when that milestone is near.

Do a risk and diversification assessment

The money you have invested in a brokerage account may not constitute your sole retirement asset. You might also have savings, an IRA, or other income you plan to use during your senior years.

But if you have a brokerage account portfolio that's earmarked for retirement, you'll want to do two things when you're about a year out:

• Make sure you're not taking on undue risk
• Make sure your holdings are well diversified

So let's talk through each point. Stocks, by nature, are risky. But contrary to what you may have heard, you shouldn't rush to dump all of your stocks ahead of retirement. Maintaining a stock portfolio as a senior is a good way to let your nest egg continue to generate a nice return.

In fact, the stock market's average return over the past 50 years has been 10%. So even if you only have a portion of your assets in stocks as a retiree, that portion of your portfolio might grow at a pace that compensates for slower growth from your less risky investments.

But to be clear, it can be a smart idea to scale back on stocks if retirement is close so that they don't comprise more than roughly 60% of your portfolio. That could mean replacing some stocks in your brokerage account with shares of a bond ETF, which could lower your exposure to risk.

Diversification and how to accomplish it

If you're holding onto stocks whose future is questionable, you may want to unload some ahead of retirement and replace them with shares from companies that are more established. For example, smaller companies can be a riskier prospect than their larger counterparts (though not always). If you have a number of small-cap stocks in your portfolio, you may want to do some shifting before retirement kicks off.

When diversifying, it's important to have a range of stocks in your brokerage account so that if a given segment of the market tanks, your portfolio doesn't automatically take a dive.

Remember, once you retire, you may start liquidating the stocks you own for cash to live on. So it's important to have access to a wide range of stocks.

If your portfolio isn't as diversified as you feel it should be after doing your review, shift assets around now, while the market is in a decent place. You may also want to consider adding some S&P 500 ETFs to your portfolio if you feel you need more diversification.

Your investments need your attention

You've no doubt worked hard to build an investment portfolio that could serve as a nice income source for you in retirement. But now, it's time to make sure that portfolio is set up to work for you once your career comes to an end. Make these moves if you're retiring in a year. They could make it so you're able to approach that milestone with more confidence.