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Retirement Asset Allocations: What is Right for You? Thumbnail

Retirement Asset Allocations: What is Right for You?

Retirement planning can be very stressful, especially when it comes to managing your retirement assets. Determining the best investment strategy for your hard-earned savings requires considering many factors such as age, risk tolerance, and investment goals. Without a proper asset allocation strategy, even the most well-intentioned investors can end up with a portfolio that is unbalanced and exposed to unnecessary risks. In this blog post, we will explore retirement asset allocations and provide insight into what might work best for you based on your own unique circumstances. 


Asset allocation refers to the dividing of an investment portfolio among different asset classes to achieve a balance between risk and reward. It typically involves the allocation of funds across three primary components: stocks, bonds, and cash equivalents. Within each asset class, further diversification can be achieved by considering factors like market capitalization, geographic location, industry sector, maturity date, and investment style. A well-designed asset allocation strategy takes into account an investor's risk tolerance, time horizon, and financial goals, aiming to optimize returns while managing risk through diversification.


Fixed Income

Fixed income investments are a crucial part of retirement asset allocation. These investments usually provide steady and predictable income streams in the form of interest payments. Bonds are the most common type of fixed income investment, including both corporate and government bonds with varying maturities. 

Bond maturity dates are crucial in a retiree's portfolio as they significantly influence the risk and return profile of their investments. Owning bonds that mature within 1-5 years provides stability and predictability, reducing the chance of capital loss due to interest rate fluctuations. These short-term bonds, though yielding less, ensure a steady income stream and principal repayment in the near term. Mid-term bonds (5-10 years) typically offer higher yields than short-term bonds, serving as a good balance between risk and return. They provide relatively stable income while allowing for some growth potential. Long-term bonds, with maturities of 20 years or more, usually offer the highest yields to compensate for the increased interest rate risk and inflation risk.

While they can boost overall portfolio return, their prices can fluctuate significantly in response to changing economic conditions. Therefore, a diversified portfolio of bonds with varying maturities can help retirees manage risk and optimize returns, accommodating both their income needs and risk tolerance.

While not as volatile as stocks, fixed income investments can still benefit from diversification across different types of bonds and maturities to reduce risk. Investors should also consider their time horizon when choosing fixed income investments, as longer-term bonds typically offer higher yields but may be more sensitive to fluctuations in interest rates.


Cash is another asset class that retirees can use to diversify their investment portfolio. It represents a liquid form of savings, which can be quickly accessed for emergencies or for spending needs. Cash investments include money market funds, certificates of deposit (CDs), and high-yield savings accounts.

While cash may seem like a safe option for retirement investments, it’s important to keep in mind that inflation can erode its value over time. For example, if your cash savings are yielding only 1% interest while inflation is running at 3%, then you’re losing money in real terms. Therefore, it's recommended to balance the amount invested in cash with stocks and bonds so as not to miss out on potential long-term returns.

 Ultimately, the right allocation of cash within your retirement portfolio depends on various factors such as age, risk tolerance, and spending needs. The right type of account for your cash investment is also important. A person might  Overall, though, every retiree should consult with a financial advisor before making any investment decisions about Cash or other asset classes available for retirement investing.

Choosing an asset allocation in Ohio


A stock is a financial instrument that represents ownership in a company. When someone buys a stock, they are essentially purchasing a small portion, or share, of that company. These shares are issued by companies to raise funds for their operations or expansion. Owning stocks gives individuals the opportunity to participate in the company's success and potentially earn a return on their investment. Stock prices can fluctuate based on factors such as the company's performance, industry conditions, and overall market trends. Investors can buy and sell stocks through stock exchanges or online brokerage platforms.

Just like with fixed income, it is important to be diversified among different types of stocks in order to help mitigate risk and have a better chance at obtaining level performance over the years.  By spreading investments across growth stocks, stocks with different market caps, and stocks domiciled in different areas of the world, investors can balance risk exposure and capitalize on various market conditions. Diversification provides the potential for consistent returns and reduces reliance on any single category or sector. By capturing the growth potential of different stocks, investors have a better chance at achieving long-term capital appreciation and income generation.

Retirees need to think about owning a substantial portion of stocks in their retirement portfolio for a key reason: combating inflation. Over a long retirement period of 30 years, inflation can significantly erode the purchasing power of a retiree's savings. While fixed-income securities like bonds provide steady income, they often don't keep pace with inflation over the long term.

Stocks, however, have historically provided higher potential returns that not only keep up with inflation but can also increase real purchasing power over time. Despite their inherent short-term volatility, stocks have the potential for significant long-term growth. A carefully chosen and diversified stock portfolio can help retirees maintain, and possibly even enhance, their standard of living throughout their retirement years.

That being said, it's essential for retirees to balance their need for growth with their risk tolerance, ensuring that any exposure to stocks aligns with their overall financial goals and comfort with market fluctuations.


Determining the right asset allocation for a retirement portfolio involves considering factors such as age, risk tolerance, investment goals, and time horizon. Age influences the balance between stocks and safer assets. Risk tolerance determines the level of volatility one is comfortable with. Investment goals shape the choice between income generation, capital preservation, or growth. Time horizon affects the level of risk and potential returns. 


Age is a crucial factor in determining asset allocation for a retirement portfolio. Younger people who are further from retirement can generally tolerate more volatility to pursue higher returns. As a result, they can afford to have a higher allocation to growth-oriented assets such as stocks. With time on their side, they are better able to weather market fluctuations and benefit from long-term compounding.

On the other hand, as people approach their retirement age, a shift towards more conservative investments is often recommended. This is because they have a shorter time horizon and less capacity to recover from potential market downturns. Preserving capital and focusing on income generation become higher priorities. As a result, a higher allocation to fixed-income assets such as bonds and cash equivalents is often preferred, as these investments provide more stability and regular income streams. Balancing risk and return become crucial to ensure the financial security and stability of retirees as they enter their post-employment years.

However, asset allocation can vary from person to person. Even people who are the same age can have drastically different allocations due to financial circumstances such as income and net worth or personal circumstances such as personality traits, goals, or past investment experiences.

Risk Tolerance

Risk tolerance refers to an investor's ability and willingness to withstand potential losses and fluctuations in investments. It plays a vital role in asset allocation by influencing the balance between higher-risk and lower-risk investments. Investors with a higher risk tolerance may allocate more of their portfolio to growth-oriented assets such as stocks, while those with a lower risk tolerance may favor more conservative options like bonds. The goal is to align the portfolio's risk level with the investor's comfort level, aiming to achieve financial objectives while managing potential volatility.

It's crucial to understand that the composition of a portfolio can greatly influence the peace of mind and confidence of a retiree. If a portfolio is too volatile due to an overweighting in high-risk assets, it can lead to unease and financial instability, hindering the retiree's ability to enjoy their retirement. A retiree might fear spending money, worrying that a significant market downturn could erode their savings.

Therefore, aligning one's portfolio with personal risk tolerance - the comfort level with potential losses - becomes paramount. Striking the right balance can ensure consistent income, safeguard the principal from extreme market fluctuations, and ultimately provide the confidence to spend and enjoy retirement without constant worry about financial secu

Investment Goals

When planning for retirement, it is important to set clear investment goals based on your needs and objectives. These goals can aid in creating your asset allocation. Whether it's maximizing income, preserving capital, or growing wealth, identifying your desired outcome is key. For instance, if you aim to generate retirement income, bonds may be more suitable, while stocks may be better for growth. 

Remember that investment goals can change over time due to personal circumstances and market conditions, so regularly reviewing and realigning your asset allocation strategy is essential to ensure it matches your current financial position and long-term plans.

Time Horizon

When choosing the right asset allocation for retirement, one important factor to consider is time horizon. This refers to the amount of time you have until your expected retirement date. If you are farther away from retirement, a more aggressive investment approach may be suitable as there is more time to ride out market fluctuations and benefit from compounding interest. 

However, if you are closer to retirement age, a conservative approach that focuses on preserving capital rather than chasing high returns may be more appropriate.

It's also important to remember that even after retiring, your time horizon still matters. The average retiree can expect to live for many years after leaving the workforce, meaning that their portfolio needs to continue generating returns over an extended period of time. It's essential to maintain an appropriate allocation that will allow for income while still allowing the account to grow and last your entire life.

asset allocation help in Dayton, Ohio with a financial planner


Occasional rebalancing is important for most asset allocations. Over time, market fluctuations can cause the percentage of each investment in your portfolio to shift, which can throw off your desired balance. Rebalancing allows you to adjust your investments back to their original allocation percentages.

How often you should rebalance depends on several factors, such as how much risk you’re willing to tolerate and how much time or effort you want to put into managing your investments. It's generally recommended that retirees rebalance once a year or when their allocations have deviated from the target by more than 5-10%.

To successfully rebalance, consider taking a gradual approach rather than making sudden changes all at once. This allows you to avoid locking in losses caused by selling assets that have decreased in value while still capturing gains from those that have increased.

By regularly rebalancing your retirement portfolio, you will be able to achieve and maintain an optimal asset allocation over the long term. Rebalancing helps ensure that you are investing according to sound strategies and reduces the chances of falling short of achieving financial independence during retirement.


It's no secret that most retirees are reluctant to follow traditional rules of thumb when it comes to planning their retirement investments. And often, for good reason: one-size-fits-all investment strategies simply don't work for everyone. Two examples of asset allocation rules of thumb are the rule of 100 and the rule of 60/40. 

While rules-of-thumb can offer useful guidance for some investors starting out with their retirement plan portfolios, it is important to do your research before committing to any strategy. You should always consider your unique financial goals and constraints to determine what makes the most sense for you.

Rule Of 100

The rule of 100 is a popular asset allocation rule for retirement accounts. It suggests that an individual should subtract their age from 100 to determine the percentage of their portfolio that should be invested in stocks. For instance, if you're 60 years old, then you'd invest 40% in stocks and allocate the remaining amount between bonds and cash. This rule is based on the premise that as people age, they tend to need to be more conservative with their investments.

However, this rule may not apply to everyone since risk tolerance and the ability to take risk varies among individuals. For example, a person with a high guaranteed income coming from social security and pensions might be more comfortable and able to invest more aggressively than a peer of the same age with a smaller amount of guaranteed income sources. 

Although the rule of 100 can aid in providing guidance on asset allocation for retirement savings, it shouldn't dictate how one should structure their portfolio entirely. Age-based investing alone ignores other critical factors such as risk tolerance, investment goals, and your specific financial situation when establishing an appropriate mix of stocks, bonds, cash, and alternative investments. Best practice involves consulting with a financial professional who can help develop personalized solutions tailored around your specific circumstances.

Rule Of 60/40

The Rule of 60/40 is another popular retirement asset allocation strategy. This approach involves investing 60% of the portfolio in stocks and 40% in bonds. The idea behind this mix is to provide a balance between growth and stability, with stocks offering long-term growth potential, while bonds provide stability and income.

When considering the Rule of 60/40 for your retirement account, it's important to take into account factors such as your age and risk tolerance. For example, someone who is closer to retirement may choose a more conservative allocation with a higher percentage of bonds, while someone younger may opt for a higher percentage of stocks.

Rebalancing the portfolio periodically is also crucial when implementing this strategy. This helps ensure that the asset allocation remains aligned with your investment goals over time. By maintaining an appropriate mix of assets through periodic rebalancing, you can help mitigate risks associated with market fluctuations while pursuing long-term financial objectives.


Managing your retirement assets can feel overwhelming, but choosing the right allocation strategy is one key to having a better chance at a successful outcome. While rules of thumb can provide guidance, they should not be relied on completely.

Instead, consider your risk tolerance, investment goals, and time horizon when determining your ideal asset mix. Rebalancing regularly will ensure you stay on track towards achieving your goals. With proper planning and consideration of factors unique to your financial situation, you can build a diversified portfolio tailored to better meet your future needs.

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Diversification and asset allocation strategies do not assure profit or protect against loss. Past performance is no guarantee of future results. Investing involves risk. Depending on the types of investments, there may be varying degrees.

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