Tags: Retirement | retirement | asset allocation

Asset Allocation and Successful Retirement Planning

By    |   Monday, 15 June 2015 10:43 PM

Asset allocation in a retirement portfolio can feel like a moving target to someone trying save and invest productively toward a worry-free retirement. But there are some generally shared principles about how to weight a retirement fund, such as a 401(k), between stocks and bonds (and sometimes cash), and when to make adjustments.

One of the first steps is to develop a sense of your retirement goals based on your needs, timeline and current income. A short-hand way to start this process is to run the numbers through an asset allocation calculator such as those available online through Bankrate, CNN Money and AARP.

Free Retirement Calculator: When Can You Retire? — Click Here to Find Out

You'll be asked your age, income, savings and tax rates as well as more subjective information such as risk tolerance and economic outlook. The calculator responds with a recommended ratio of stocks to bonds, where stocks typically entail a higher risk of loss but greater returns — the opposite of bonds.

Risk tolerance might seem more like a feeling than a metric, but investment adviser and writer Paul A. Merriman argues that it's a valid indicator.

"Never ignore your emotions or your 'better judgment' to chase higher returns," Merriman wrote for MarketWatch.

As the asset calculation variables suggest, your allocation is likely to change over time.

How Soon Can You Retire? Free Test Shows You When — Click Here

The conventional wisdom still holds that for the vast majority of workers, IRA and 401(k) accounts and the like should be tilted toward stocks earlier in one's career and gradually shifted toward safer bonds as the retirement date approaches.

But even so there is vigorous debate among investors and financial experts on details that can determine whether your retirement portfolio is performing to its full potential and yielding every possible dollar.

The American Association of Individual Investors, as one example, has challenged the popular belief that allocations must be changed. The organization has put forward some alternative ideas not just on when and how, but whether, to vary your portfolio's mix of stocks and bonds as well as cash.

An Extremely Simple Way to Determine If You're Ready to Retire — Find Out Now

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Asset allocation in a retirement portfolio can feel like a moving target to someone trying save and invest productively toward a worry-free retirement. But there are some generally shared principles about how to weight a retirement fund.
retirement, asset allocation
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2015-43-15
Monday, 15 June 2015 10:43 PM
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