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Sound Advice: October 29, 2025

What is the best asset allocation for a recently retired investor? 

The best asset allocation for a recently retired investor is typically a balanced mix of stocks, bonds, and cash that prioritizes income, growth, and capital preservation while managing risk and market volatility.

Typical Asset Allocation Ranges

Stocks (Equities): 40–60% of the portfolio, with a higher allocation for those at the beginning of retirement and a gradual reduction as age increases.

Bonds (Fixed Income): 30–50%, primarily to provide steady income.

Cash/Cash Equivalents: 10–20%, meant to cover 1–2 years of living expenses and provide liquidity for unexpected needs. 

Asset Class

Suggested Allocation (%)

Stocks

40–60

Bonds

30–50

Cash

10–20

 Popular Guideline Approaches

  • “Rule of 110”: Subtract your age from 110 to get your stock allocation (e.g., age 70 → 40% stocks, 60% bonds/cash).
  • Bucket Strategy: Divide assets into a “short-term” bucket for immediate needs (cash), a “medium-term” bucket for 5–10 years (bonds), and a “long-term” bucket for growth (stocks)

 Additional Retirement Considerations

  • Dividend Stocks and Income Funds: These can help provide income while maintaining some growth potential.
  • Bond Ladders and TIPS: To provide reliable income and inflation protection, respectively.
  • Tax-Sheltered Accounts: Hold investments with higher tax costs in IRAs or 401(k)s when possible.

 Risk and Adjustment

  • The right allocation depends on risk tolerance, health, guaranteed income sources, and withdrawal strategy.
  • Maintain flexibility: Adjust allocations over time, decreasing equity exposure with age and after large market gains or losses.
  • Individual needs vary—some may need more stability; others may require more growth to guard against outliving assets.
A recently retired investor often starts with a balanced portfolio, shifting toward more conservation allocation as retirement progresses to increase risk management while ensuring sufficient growth and liquidity.

N. Russell Wayne

Weston, CT  06883

 203-895-8877

www.soundasset.blogspot.com

 

 

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