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Assess risk before making investments in retirement

Day traders and amateur investors who enjoy watching market developments may feel that they are far from done with trading when they retire, but it's important to make sure that a nest egg isn't relying on volatile stocks before trying to invest again, according to financial planner Steve Vernon of CBS' MoneyWatch.com.

"One of the most important considerations is whether a significant stock market decline would reduce your retirement income below the amount you need to cover your living expenses," he writes. Before making any serious moves, he suggests asking yourself a few questions.

First, he recommends thinking about from where else your retirement income would be coming. It's best to have a few sources - whether that means Social Security, a pension or a part-time job - so that you're never leaning too heavily on one source of revenue.

Vernon claims that if you've downsized your house or are making enough to cover your daily living expenses, you should feel free to start investing in high-risk stocks and bonds. A good way to gauge whether you would be okay is to try and imagine another financial meltdown.

"Mutual funds with asset allocations of two-thirds to stocks depreciated by 30 to 35 percent during the recent stock market crash, from the pre-crash high in late 2007 to the low during the crash. Could you sleep at night, knowing there might be a repeat event?" Vernon writes.

Many retirees may look at future investments as a step to build up a nest egg further or just a good way to spoil the grandchildren in the future. Sometimes, it can be helpful to gather with peers who are also traders to talk about the most recent developments in the market.

This is exactly what happens at many Del Webb retirement communities. For example, at Sun City Peachtree, investors come together for investment club meetings where they can talk about different strategies and how to best diversify portfolios.  

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