A retiree’s tolerance to risk can change for some of the same reasons as during their working years, such as going through a divorce or receiving an inheritance.

Also, taking your time horizon into consideration still applies, since you’re investing for a period of 20 to 30 years, or more. Upon retiring, many investors will hold a significant proportion of their portfolio in equity investments to help support a long retirement. If markets suffer a downturn in the earlier years, time remains for markets to recover. But as the years go by, the market risk increases, so an investor typically reduces their equity investments and increases their fixed-income investments. Another way to defend against a market downturn is to establish a cash reserve: by drawing retirement income from the reserve, you give your equity investments time to recover. Some retirees are concerned about the risk of outliving their savings. A combination of methods addresses this concern, commonly involving deferred government benefits, a personalized withdrawal strategy and, for some retirees, an annuity.