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End Up King of Mountain With the Glide Slope

MIAMI ( TheStreet) -- It's critical that you take the right amount of risk at each stage to position yourself for a safe, secure retirement. If you don't take enough risk you may never accumulate enough for retirement. But if you take too much the probability of a successful retirement may actually decrease.

Here's an easy way to estimate how much risk you should take at each stage of your career.

You need to be sure you're in control of your risk while on the slope toward retirement.

The most important factor to consider is your time until retirement. Early in your career, time is on your side; it makes sense to have a high exposure to equities to capture their higher return potential.

As you approach retirement, you will need to balance your need for liquidity and safety by reducing your equity exposure somewhat. You never outgrow your need for equities, though. Even at advanced ages it makes sense to hold a healthy position in the world's stock markets.

As a guideline, we've developed the glide slope approach that smoothly transitions investors as their careers progress. Because not all investors have the same risk tolerance or financial situation, the glide slope provides for a range of reasonableness. We believe the suggested portfolios are prudent, time tested and offer the highest probability of success over your career:

Investors' first decision to control risk and provide liquidity in their portfolios is the percentage of stocks versus bonds or fixed income. Next, the equity (stock) and fixed income (bond) portions of the portfolio should be as close to optimum as possible in an uncertain world. We think that means a globally diversified equity portfolio and a high-quality short-term bond portfolio. The makeup of the two sections, stocks and bonds, doesn't change, but the percentage each section represents in the portfolio varies.

Early in their careers, investors may very well wish to have a 100% equity exposure. This value of this position will of course vary as the market goes through its cycles, but historically offers the best possibility for meaningful growth of real value.

We believe investors should be positioned in their retirement portfolios well in advance of the actual retirement date. After all, they don't want their decisions to retire to be based on what the market did yesterday.

We've designed the glide slope assuming that investors plan a reasonable 4% withdrawal rate during retirement, wish to have 10 years of liquid reserves at retirement and want to be positioned in their retirement portfolios five years before actual retirement. So their retirement portfolios would consist of 40% high-quality fixed income and 60% equities. Over time a mix such as this has a high probability of supplying the steady income retirees need, providing a modest growth sufficient to outpace inflation and never run out of money.