My wife and I are approaching retirement, and our financial adviser is recommending that we put about 70% of our nest egg in stocks and about 30% in bonds. This approach seems risky to me. Is it? My preferred mix is about 60\/40.<\/p>\n\n\n\n
We hear questions frequently about asset allocation and pinpointing an optimal mix. The easy answer is: It depends. It depends, among other factors, on your ages, income from other sources (like Social Security and maybe a pension), the size of your savings and, as you indicate, your tolerance for risk. Let\u2019s say income from sources other than your nest egg covers your basic living expenses in retirement. In that case, a 70\/30 mix might be less risky than you imagine.<\/p>\n\n\n\n
All that said, a better answer for retirees who are wondering whether to pump up their stockholdings might be: Leave well enough alone.<\/p>\n\n\n\n
I empathize with you\u2014and your adviser. Yes, a 70\/30 mix of stocks and bonds seems aggressive, especially for investors in their 50s and older who, first, have long regarded a 60\/40 split as gospel and, second, have lived through the market collapses of the early 2000s.<\/p>\n\n\n\n
But many financial planners today are concerned that low interest rates, anemic bond yields and the possibility of higher inflation are a threat to your financial health. As such, retirees (or so the thinking goes) should consider putting, or keeping, a good chunk of their savings in stocks, which offer the potential for bigger returns than fixed-income investments. Of course, more stocks also mean more risk.<\/p>\n\n\n\n
So, what to do? A recent study with an intriguing title, \u201cThe Unimportance of Asset Allocation in Retirement Planning,\u201d might help you and your adviser find common ground. The study, by Joe Tomlinson, an actuary and financial planner who writes about retirement finances, looks at how increasing stock allocations might affect withdrawals from savings in later life. His starting point: a hypothetical retirement-age couple trying to decide between a traditional mix of 60% stocks and 40% bonds and a 75\/25 split. The couple is planning for a 30-year retirement and has $1 million in savings.<\/p>\n\n\n\n
What\u2019s the Ideal Asset Mix in Retirement? Is It 70\/30? 60\/40?<\/p>","protected":false},"author":4,"featured_media":607,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[36],"tags":[],"class_list":["post-606","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-news"],"yoast_head":"\n