Chatzky said people should be worried if they have too much money in AI stocks like Nvidia and Google unless they actively rebalance their investments. She explained, “When the stock market runs hot, our [target] asset allocations tend to get out of whack”, as reported by Investopedia. Many people say they rebalance their portfolios but actually don’t. In a bull market, this can make them overweight in certain stocks like AI, which means taking more risk than they planned.
AI stocks risk for pre-retirees
For pre-retirees worried about the economy because of tariffs or lower consumer demand, Chatzky recommends two main steps. First, delay taking Social Security as long as possible, ideally until close to age 70. She said, “Delaying Social Security until you get as close to 70 as possible is a really smart move for the majority of people who can afford to do it”.
Second, keep working longer if possible. Staying employed gives retirement savings more time to grow and allows you to continue contributing to retirement accounts. Chatzky warned that if the market goes down early in retirement, the common 4% withdrawal rule can be risky. “The 4% rule becomes really problematic when you have a downturn in the first few years of your retirement”, as noted by Investopedia report.
Safe retirement planning tips
Chatzky suggests moving some money into cash and fixed income, especially keeping a couple of years of expenses in cash. This helps avoid selling investments at a loss if the market drops. Retirees should also reduce withdrawals during down years instead of taking the full 4% from investments, to protect their savings. Chatzky recommends covering essential expenses with Social Security and some form of guaranteed income, like a pension or annuity, to reduce the effect of market ups and downs.
A common mistake is thinking retirees will spend only 70%-80% of their pre-retirement income. Data from Chase shows people often spend more before and after retirement, especially on big trips and home improvements, as cited in the report by Investopedia. She advises looking at your current life costs and thinking about how spending might change in retirement, so you are prepared and avoid surprises.
FAQs
Q1. Should pre-retirees worry about investing in AI stocks?Yes, pre-retirees should be careful with AI stocks like Nvidia and Google and rebalance their portfolios to avoid taking too much risk.
Q2. How can pre-retirees protect their savings from market drops?
They can move money into cash and fixed income, delay Social Security, reduce withdrawals in down years, and use guaranteed income like pensions or annuities.