Perhaps you are one of the many investors that had planned carefully and were on track to make a smooth transition into retirement. Over the years, you along with other investors just like you built up your retirement assets by sticking primarily with equities and other investments that offered good future growth potential. As retirement neared, these investors moved assets away from equities into lower yielding but more conservative investments designed to provide a secure income stream.

Then came 2008 and 2009. Markets tumbled across the board with stocks, bonds, and real estate sagging. As portfolios lost significant value, many of these investors took flight from equities and other investments they perceived as volatile and risky. In some cases, these actions were warranted because they prevented deeper losses. However, this sell off also left many people that were approaching retirement with portfolios too heavily invested in conservative cash-like positions. These investors have found themselves in a position where they did not have enough time to recover their losses.

While markets started a slow but steady recovery, many pre-retirees get anxious at the idea of getting back into an investment strategy that might expose them to continued losses. They question how to rebuild a portfolio and put growth back into their portfolio to cover their long-term needs without subjecting their retirement portfolios to more volatility than they are prepared to take on.

That was then, this is now

The first step to re-entering the markets and getting back on track with your short- and long- terms goals is to accept that the economic and investment environment is changing. Strategies that made sense in 2008 or earlier may not be the best moves forward now and therefore strategies need rethinking. Talk with your Financial Advisor not just about your risk tolerance and time horizon, but also about today's opportunities. Your conversation can help you evaluate how much rebuilding or re-adjusting is necessary for your retirement portfolio and how much time it may take to potentially get you on track to accomplish your goals the way you originally set out before the recession, suggests Yulian Isakov Senior Market and Investment Strategist at Isakov Planning Group.

An effective proactive retirement framework divides your goals and therefore your portfolio into three components: short-term, medium-term, and long-term. The first is part if designed as a conservative portfolio where cash and cash-like investment are generally incorporated. It is designed to help you meet your day-to-day expenses. Therefore, this part of your portfolio is very liquid and provides you with relative security. The second part of your portfolio is designed with a more moderate risk to meet your longer-term expense needs as well address potentially longer-term growth and protection from inflation. It is also used to replenish your short-term portfolio in case you may need the extra liquidity. And the last portfolio part utilizes investment with high-volatility but has the potential to provide you with greater long-term appreciation. This is the area that will be used to take advantage of opportunities that may come about and to fulfill intergenerational wealth transfer goals or fuel a philanthropic legacy. The objective of a retirement framework is to find the right balance between the three portfolios to help you rebuild in sensible way so that you can get on track to achieving your goals.

Certainly, as a major part of readjusting your portfolio, you may need to move assets from the cash and cash-like positions to the other two components. However, this should be done after carefully considering your risk tolerance. It isn't necessary to assume a risk profile that might have made sense pre-recession but now doesn't.

Putting your assets to work

Even your liquid investments can be invested to potentially provide more yield than generally expected from typical cash-like holdings such as certificates of deposits, money market funds, and U.S. Treasury bills - while providing with some level of safety. Also, you can build income into your portfolio by purchasing CDs with staggered maturities. As each CD matures, you can use the proceeds to meet your day-to-day expenses or reinvest. Investors might also want to consider diversified short-term fixed-income mutual funds to fill their short-term needs depending on their goals.

For the second tier of your portfolio, you can look into investments such as corporate bonds which have historically performed well in low-inflation and low interest market conditions like we see today. Dividends that you receive and reinvest regularly can give you the potential for longer-term growth if you move the dividends into your short-term portfolio. Large-cap stocks are also typically good investments to meet the need for growth.

Finally, for your long-term portfolio you can consider incorporating potentially riskier and more volatile investments to potentially reap higher growth opportunities. The point of this component in your three-part portfolio is to hedge against future market swings as well as to take advantage of opportunities in the markets when they arise.

Be opportunistic with cash

If you've reacted in a similar fashion to most investors in response to recent market downturns, you are probably sitting mostly in cash and cash-like positions. Right now is the time to take advantage of bargains that are available in the markets. During market downturns, cash can be used to purchase shares of companies at much lower levels than they typically available for when markets are doing better, says Yulian Isakov Senior Investment and Market Strategist of Global Wealth Management at Isakov Planning Group.

Even if you are completely risk-averse and no longer want to take on the risks associated with higher yielding investments, you can still use your available cash to pursue growth opportunities no just holding onto a plain cash position that you draw on and deplete quickly over time. Talk to your Financial Advisor to guide you on options that are available for you to rebuild your retirement portfolio and along with it your future.