Which statement about the Investment Assets-to-Total Assets ratio is correct?

Which statement about the Investment Assets-to-Total Assets ratio is correct?

• A. It should remain constant regardless of retirement plans.
• B. It is not related to retirement planning.
• C. It should fall as you approach retirement.
• D. It should rise sharply as you approach retirement.

Answer: (D)

This ratio tracks how much of your wealth is in investments versus all your assets. As retirement gets closer, you typically shift more of your wealth into investable, liquid assets—like retirement accounts and taxable investments—to ensure you have readily available funds to cover expenses in retirement and to manage cash flow. Non-investment assets, such as home equity or other illiquid holdings, may represent a smaller share of your total assets over time or be reduced through downsizing or paying off debt, which pushes the investable portion higher. Because of this reallocation toward investments as retirement approaches, the Investment Assets-to-Total Assets ratio tends to rise, in some cases sharply.

This ratio tracks how much of your wealth is in investments versus all your assets. As retirement gets closer, you typically shift more of your wealth into investable, liquid assets—like retirement accounts and taxable investments—to ensure you have readily available funds to cover expenses in retirement and to manage cash flow. Non-investment assets, such as home equity or other illiquid holdings, may represent a smaller share of your total assets over time or be reduced through downsizing or paying off debt, which pushes the investable portion higher. Because of this reallocation toward investments as retirement approaches, the Investment Assets-to-Total Assets ratio tends to rise, in some cases sharply.