07/22/2014 03:15 pm ET Updated Sep 21, 2014

'Click': Are You Ready for the Big Switch?

We spend a lifetime saving and preparing for retirement, surrounded by words like "glide path," "getting on track," and "the retirement transition." Soothing, comforting words that depict your financial journey as a natural progression. A journey that, if approached right, will make you think "What was all the fuss about?" regarding retirement planning.

Hey. It can happen. I've met individuals whose retirement planning was that smooth. They saved early and often, took advantage of financial education tools available, were blessed with strong family support, diligently managed to a budget, had good career progression and worked closely with a trusted financial advisor. Most often, they sailed into a life of dinners out with friends, extended-stay vacations and happily ever afters. Sound familiar to you? If yes, feel free to stop here. If not, read on!

In America, half of workers have less than $10,000 saved for retirement and roughly 25 percent work with a financial advisor, which means that, for many, the moment of retirement will be anything but a non-event. Retirement will be an abrupt and significant event, perhaps the biggest of your lifetime. That being said, all is not lost. There is plenty we can do to prepare.

At the moment of retirement, our paycheck stops like a light switching off. (Click!) For many, Social Security checks are significantly lighter than a regular paycheck, and yet, most of us still do next to nothing to adjust to this new reality. We've spent a lifetime dreaming of a smooth, progressive financial journey and I believe we greatly underestimate the moment I call "the big sw!tch." The moment when that paycheck is turned "off."

For those of us who didn't follow the perfect path to the moment of retirement, there is a new concept making its way around financial circles. It is called "portfolio repositioning." Although simple in concept, the tools and products being developed are still in their early stages. I would compare it to the asset allocation modeling of 15 years ago. As we approach the moment of retirement, it is no longer about what we shoulda, coulda, or woulda done. Now it's about how to best position or reposition the financial products and other retirement income generating assets (e.g., real estate) that we have for a safe and secure retirement.

After going through a portfolio assessment process, we'll likely need to make some changes to reflect the fact that the paycheck is gone (aka portfolio repositioning). This could include reducing risk exposure, a change in the relationship between liquid and non-liquid assets or increases to investments that have guaranteed income features. While these changes don't guarantee you'll have enough income in retirement, they can help ensure your assets are best positioned to achieve your retirement income goals.

While this may sound like a logical, natural step, many of us "drift" into retirement and carry the same financial behaviors (e.g. - procrastination, inertia, denial) we had during our working years. In many cases, it takes a market jolt for retirees to realize their resources were poorly positioned as they drifted right past the big sw!tch. Don't let the big sw!tch take you by surprise.

If you're nearing retirement or have done very little around your total portfolio since retiring, I'd encourage you to explore the portfolio repositioning concept. More and more advisors are adapting their practices to help transitioning retirees address this need. Like the asset allocation modeling from many years ago, effective tools and resources are starting to find their way into the retirement income planning market.


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