6 Frightfully Frugal Halloween Costumes

As your retirement date approaches, be careful. Just as you have a "to-do" list to follow as you approach retirement, you have some "don't dos" to abide by, or you risk upsetting your carefully laid plans.

For example, don't make the mistake of exiting completely from either stocks or bonds. You should be in both, but with a different balance as you age. Tread cautiously into illiquid investments such as real estate or annuities. You may not be able to access funds so readily if you have a sudden change in circumstances. A well-diversified retirement portfolio is still important after you stop working.

And don't blow through your savings. Spend your money carefully, or you could end up in the same position as some sudden lottery winners: broke. Create a budget, and stick to it.

Keep the following caveats in mind, and you'll have a more secure retirement.

Don't sell all your stocks

The financial crisis blew a big hole in many investors' nest eggs. So why not eliminate all or at least a big portion of those risky stocks in favor of seemingly safer investments, such as bonds, in your retirement portfolio?

Big mistake, financial advisers warn.

From the next devastating hurricane to the European debt crisis to changing Federal Reserve policy to events in Syria, any number of factors can send stocks plunging. Rather than panicked selling, the better strategy is to stay the course.

"We typically advocate reducing, but not entirely eliminating, equity exposure when approaching retirement," says Dan Kern, president and CIO of Advisor Partners in Walnut Creek, Calif. "Individuals in retirement may need their portfolios to generate income, but will also need capital appreciation and inflation protection to preserve purchasing power."

Diane Pearson, a CFP professional with Legend Financial Advisors in Pittsburgh, Penn., agrees. In place of the traditional 70-30 or 60-40 split of stocks to bonds in one's portfolio, she recommends a more equal 50-50 split, giving more weight to domestic stocks over risky emerging market stocks.

Don't go to all bonds in investing

Just as it is a mistake to dump all your equities, it's a mistake to go to the other side of the cliff and fill up entirely with bonds and other "safe" investments.

Yet, many people view bonds as rock-solid investments somehow immune to the dangers that stocks pose.

But events of the past several months, when interest rates began gradually rising, have proved this reasoning to be fallacious. People who held long-term government bond funds got a rude awakening when the value of their holdings declined more than 13% on average between May 9 and Sept. 5, according to Morningstar. Bond prices move in the opposite direction of interest rates.

"While bonds and other fixed income investments have a place in most investment portfolios, it shouldn't always be a place of honor," says Bill Riccio, assistant vice president of ERISA Plans at United Planners Financial Services in Scottsdale, Ariz. "Investors with bonds in the current interest rate environment don't earn much of a return without taking extraordinary risks."

So rather than be seen as safe investments, bonds need to be analyzed carefully, and investors shouldn't chase solely after yield. If the interest rate seems too high in the current environment, there's probably a reason to be wary.

Limit exposure to illiquid investments

A cardinal rule of investing is to stay liquid. But with current interest rates still so low, many investors have been tempted to trade off liquidity for greater returns. They could get burned.

Master limited partnerships, nontraded real estate investment trusts, or REITs, and alternative investments have gained in popularity.

But beware: Investors who rely on their investment portfolio for current expenses can get stuck.

"Some of these investments may tie up your principal for seven to 10 years," says Larry Luxenberg, a financial adviser and partner at Lexington Avenue Capital Management in New City, N.Y. "While an investor may not plan to touch principal for many years, circumstances can change, and these investments can limit their flexibility or trigger penalties."

Should you want to sell your house and move to a retirement area, change your estate plan or need liquidity for your estate, illiquid investments could prove an obstacle. Relying heavily on illiquid investments may block the repositioning of holdings in your retirement portfolio when markets or circumstances warrant these shifts.

At the least, advises Luxenberg, an investor should get adequately compensated for the lack of liquidity and limit the portfolio weighting of these investments to perhaps no more than 10% to 15%.

Don't think too short term

This is good advice regardless of where you are in the retirement planning process. Too many people get caught up in the day-to-day gyrations of the market.

For individuals in their 20s, 30s, and even 40s and 50s, it's paramount to save as much as possible. "Especially at younger ages, your savings patterns are going to have a much larger effect on your retirement than will the returns you earn in the market," says Jeffrey Brown, professor of finance at the University of Illinois.

Even at older ages, thinking long term is important. Recent longevity studies have shown one person in a couple could very well live to 90-something.

And when considering a potential legacy for heirs, you have to think even longer term. Over a 30-year period, inflation at 3% would erode the value of a dollar to about 41 cents.

Given that, it's important to preserve your purchasing power with such investments as stocks and real estate that have shown a good chance of keeping up with inflation over the long-term.

If you believe a well-diversified portfolio makes sense at 30 or 40, then you ought to still believe in diversification at 60 or 70 as well. "Although you probably want a less risky portfolio at older ages," says Brown, "this does not necessary mean zero risk. Diversification still matters."

Don't focus only on the size of your account

Of course it is nice to end up at retirement with a sizable nest egg, but it would be a mistake to think the work is over when you get there. You still have to figure out how to make that nest egg last for up to three decades or longer since you don't know how long you are going to live.

Products that allow you to convert wealth into guaranteed lifelong income -- such as life annuities -- may be a good way to provide true income security during retirement.

"Psychologically, however, it can be difficult to get out of the bad habit of defining your retirement preparedness based on how much money is in your 401(k)," says Brown. "Our research has shown that if people frame their retirement problem in terms of how much they want to spend each month in retirement, annuities look extremely attractive. But when the issue gets framed in terms of the size of one's account balance, people will often mistakenly view annuities as risky."

Don't spend like a lottery winner

Evelyn Adams managed to hit the New Jersey Lottery jackpot twice -- first in 1985 and again in 1986 for a total of $5.4 million.

A heavy gambler, the New Jersey native soon lost much of her money in Atlantic City casinos. By 2001, she was broke and living in a trailer.

Easy come, easy go.

"Many lottery winners feel their assets couldn't possibly run out, and they overspend without a plan," says Riccio. "No longer having to work, ultimately they have no plan to save and have to go back to work because they overspent."

One way to avoid falling into this trap is to create a budget on either a monthly or annual basis.

Another way is to work with a tax professional or an investment adviser to help create a budget and spending plan to maximize the longevity of the assets in your retirement portfolio.

"Sticking with a disciplined financial plan and avoiding the temptation to buy yourself and family members elaborate gifts or paying for a grandchild's college will keep your assets at a comfortable level," says Riccio.