I'm close to retirement. Should I keep buying ASX shares?

Shares can be volatile, but they can also help to fund a comfortable retirement.

A mature age woman with a groovy short haircut and glasses, sits at her computer, pen in hand thinking about information she is seeing on the screen.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

So you're nearing retirement? Congratulations. It must be nice to be so imminent to your (I'm sure) long-awaited golden years. But retirement can be a financially stressful time, as well as an exciting one. The loss of a regular stream of active income is something that can be hard to come to terms with, not to mention plan ahead for.

It's understandable that many soon-to-be retirees might feel like they need to change their investing practices. Perhaps you've been investing in shares your whole working life, but are planning on moving to 'safer' investments like fixed-interest bonds or term deposits to fund your retirement.

But that could be a mistake. I accept that retirees need a higher level of financial certainty and security due to the loss of that primary stream of income. Most retirees probably should be a little more conservative with their investing habits than those with years or decades left in the workforce.

However, I don't think most people approaching retirement should simply abandon the asset class that has historically generated higher returns than most others, including cash and bonds, over long periods of time.

Sure, ASX shares can be volatile. And we all know the mental trauma of going through the inevitable stock market crashes that the markets throw up from time to time. That cannot be a pleasant prospect for someone who is about to lose their main income source to contemplate.

Why buying ASX shares still matters in retirement

But I would argue that, unless you have millions and millions of dollars in the bank and can generate a generous income from term deposits alone, pursuing a conservative mix of asset classes for your retirement portfolio is the way to go for most would-be retirees.

In our modern era, most of us can expect to live well into our 80s and perhaps beyond. That means that someone who retires at 65 will have to ensure an income stream is in place for another 20-30 years if they wish to spend the rest of their lives in comfort.

That means you'll want to keep at least some of your nest egg invested in assets that will allow you to continue to compound your wealth at the highest rate possible. That would be buying ASX shares.

Now, everyone is different, and there's no one-size-fits-all retirement investing strategy to recommend. Plus, everyone has different levels of existing wealth, lifestyle expectations and risk appetite. Some people might be on an aged pension, and others might be fully self-funded retirees. So I'm not giving out specific financial advice here, just noting some facts.

Planning ahead

But I think most people who are approaching retirement should work out a balance of asset classes. Maybe you want to keep at least three years worth of living expenses in cash and cash assets like term deposits. That will allow you to ride out any stock market crash with plenty of cash set aside.

You could opt for a 30%/30%/40% split between cash, term deposits and/or government bonds, and ASX shares.

A more conservative approach could be allocating 20% of your nest egg to ASX shares, and the rest to cash and term deposits. This might be something to have a chat about with a financial advisor, considering your own personal circumstances.

To sum it up, I don't think it's a good idea to abandon ASX shares entirely from your retirement plan. Your golden years could suffer immensely if you do.

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Retirement

Couple holding a piggy bank, symbolising superannuation.
Retirement

The best ASX ETFs for retirees in 2025 and beyond

Here are three funds that could be good additions to a balance retirement portfolio.

Read more »

Married elderly man and woman in love spending time together on bench on a phone, symbolising retirement.
Retirement

Aiming for rock-solid retirement income? I'd buy these two ASX shares

I’m reassured by the stability of these two stocks.

Read more »

Smiling elderly couple looking at their superannuation account, symbolising retirement.
Retirement

How to retire early using ASX shares (even when starting late)

It's never too late to start investing.

Read more »

a mature aged couple dance together in their kitchen while they are preparing food in a joyful scene as the Breville share price rises on the back of a 25% profit surge
Retirement

Retirement income: 3 Australian dividend stocks to own for decades

Analysts think these shares could be good picks for retirees.

Read more »

Couple holding a piggy bank, symbolising superannuation.
Retirement

Is $500,000 enough to retire in Australia? Here's what the numbers say

Let's see where half a million would get you when it comes time to retire.

Read more »

An older couple use a calculator to work out what money they have to spend.
Retirement

Changes to deeming rate thresholds may boost your pension from tomorrow

The thresholds used to calculate deemed income from financial assets are going up. Here is the impact.

Read more »

Two people smiling at each other while running.
Retirement

From next week you can earn and own more while still qualifying for the age pension

The latest changes to the pension assets and income tests will come into effect on Tuesday.

Read more »

Joyful woman at a beach on the Gold Coast with her arms spread out.
Retirement

Aged 30 and earning an average wage? You're now set up for retirement. Here's how

A 30-year-old earning $75,000 per year for life will have enough for a comfortable retirement after 1 July.

Read more »