Here's a handy way to think about it: Keep your age in fixed income. If you're 65 years old, at least 65% of your portfolio ought to be in fixed income.
Keeping money in mutual funds over the last few years has probably been a bad idea for individuals reaching retirement. The better bet is to find income generating securities, for instance, stocks paying dividends. Even though the market value may decrease, income is still derived from dividents payed by the company.
Another example might be short-duration, corporate bonds that are trading at a discount to par. The iShares Corporate Bond Fund (HYG) yields about 9% for people who don't want to hold individual bonds. There are some risks to corporate bonds, but provide one of the few good ways to get a reasonable amount of income.