Many retirees adopt a conservative investment strategy to help ensure they have enough income to support themselv⛦es. The “100 minus age” rule, a popular guideline, suggests subtracting your age from 100 to determine what percentage of your portfolio should be invested in stoc⛎ks.

But with life expectancies rising, many experts recommend more growth-oriented formulas, like 110 or even 125 minus age. In other words, exposure to growth assets is becoming increasingly important for outpacing inflation and maintaining your lifestyle. Let’s explore how proper asset allocation can help you strike the right balance between incom𒈔e and growth after 70.

Understanding Asset Allocation for Retirees

澳洲幸运5官方开奖结果体彩网:Asset allocation refers to how you divide your investments among 澳洲幸运5官方开奖结果体彩网:asset classes, primarily including stocks, bonds, and cash🐠 or cash equivalents. The ratio between these categories is one of the most significant determinants🗹 of your portfolio’s risk and return profile, as each asset class has distinct advantages and drawbacks:

• Stocks offer the best long-term growth potential but are volatile in the short term.
• Bonds produce more stable income but tend to grow more slowly than stocks.
• Cash equivalents provide the most stability but may not keep up with inflation.

As you move through different life stages, your 澳洲幸运5官方开奖结果体彩网:ideal asset allocation usually shifts. When you’re younger, you🐲 can often afford to focus on growth and maximizing returns since y▨ou have plenty of time to recover from market downturns.

Once you approach retirement, you have less time to ride out volatility. By your 70s, 澳洲幸运5官方开奖结果体彩网:achieving optimal asset allocation is less about maꦓximizing returns and more about prese𒈔rving your savings so they can support your day-to-day life.

The Role of Growth in a Retiree’s Portfolio

Retirees often prioritize low-risk, income-producing assets, but avoiding growth investments entirely can be a big mistake. A portfolio focused solely on stability may not generate high enough returns to sustain your lifestyle, especially if you encounter a poor 澳洲幸运5官方开奖结果体彩网:sequence of returns early in retirement or high 澳洲幸运5官方开奖结果体彩网:inflation.

Without some exposure to growth, the risk of outliving your savings becomes very real. “Overly conservative portfolios early in retirement can struggle to keep up with inflation and reduce long-term financial flexibili𝕴ty,” 🃏said Melody Townsend, CFP, founder of . “The key is to balance appropriate risk with realistic income planning—not to eliminate growth altogether.”

With people living longer than ever, this balancing act has become increasingly delicate. While life expectancy dipped briefly during the COVID-19 pandemic, the broader trend has been upward for decades.

How To Balance Growth and Income

One of the most popular and effective strategies for balancing growth and income in retirement is the 澳洲幸运5官方开奖结果体彩网:bucket strategy. Recommended by Townsend and , it involves dividing youꦦr portfolio into “buckets” based on 🎃when you need the funds.

For example, according to Petitjean, you might separate your p🅺ortfolio into the𓃲 following three buckets:

• Short-term funds for the next two to three years
• Intermediate-term funds for the next four to eight years
• Long-term funds you don't need for eight or more years

“The short-term bucket would be invested very conservatively, such as in a combination of cash, money market funds, and short-term bond funds,” Petitjean said. “The intermediate-term bucket might hold core bond fund👍s⭕ with longer maturities and yield a higher annual return. Finally, the long-term bucket should be invested more aggressively, with investments such as U.S. and international stock funds.”

“This allows retirees to draw income without being forced to sell growth investments during down markets,” Townsend said. As a result, you can 澳洲幸运5官方开奖结果体彩网:weather market volatility with greater confi🌜dence, knowing your near-term needs are protected even if long-term investments temporarily lose𝔍 value.

Asset Allocation Funds

In addition to managing your asset allocation manually, you can use certain 澳洲幸运5官方开奖结果体彩网:mutual funds and ETFs designed to help you achieve your desired mix more automatic🌃ally. Some of the most popular examples include:

• 澳洲幸运5官方开奖结果体彩网:Target-date funds: Designed around a specific retirement, these funds automatically adjust your investment mix over time. They typically start with a more aggressive allocation focused on growth stocks, then gradually become more conservative using bonds as the target date approaches.
• 澳洲幸运5官方开奖结果体彩网:Balanced funds: These maintain a fixed ratio of stocks to bonds, aiming to offer a more permanent blend of growth potential and stable income. For example, a 60/40 split is common.
• 澳洲幸运5官方开奖结果体彩网:Growth funds: Focused primarily on 澳洲幸运5官方开奖结果体彩网:capital appreciation, these funds invest heavily in stocks with strong long-term growth potential. They also tend to reinvest earnings rather than paying out dividends. 
• 澳洲幸运5官方开奖结果体彩网:Income funds: These funds are designed to generate steady cash flow through interest and dividend payments. They often include bonds, stable dividend-paying stocks, and other income-generating assets.

While these asset a✃llocation funds🍷 offer convenience, they may lack the precision necessary to adapt to your evolving needs. “They tend to be a good starting point for younger investors who are focused on accumulating for simplicity’s sake,” Petitjean said, “but they’re not personalized and can be somewhat of a black box.”

For retir🅘ees, that lack of customization can be a significant drawback. “Balanced/income funds might work for some, but I usually recommend customizing allocation based on the retiree’s full financial picture,” Townsend said. “Off-the-shelf funds have the poteܫntial to oversimplify what is usually a very personal decision.”

Rebalancing Your Portfolio

Because each asset class will grow at different and unpredictable rates, your portfolio will naturally drift from your target allocation. The process of realigning your investments with your ideal mix is called rebalancing. It involves selling 🍸off excess assets in one area and using the proceeds to bolster lagg🔯ing positions in others.

For example, say your target allocation is 60% stocks and 40% bonds. After a strong year in the stock mar🍷ket, equities might grow to represent 70% of your portfolio. Rebalancing would involve selling stocks and buying bonds to bring your ratio back in line and achieve your desired mix of growth and income.

“Rebalancing is important for everyone, but it becomes even more important in retirement,” Petitjean said. “Not only does it help to keep the portfolio in line with its predefined target, but it also pr♉ovides an opportunity to buy low and sell h൲igh.”

Risk Management Strategies

Beyond aဣss🐽et allocation, here are some other effective ways to protect your portfolio in retirement.

Diversification

澳洲幸运5官方开奖结果体彩网:Dividing your investments among stocks, bonds, and cash equivalents reduces your risk of suffering catastrophic losses, but true 澳洲幸运5官方开奖结果体彩网:diversification takes this idea further. It involves building variety within൩ each category, such as holding stocks across different sectors, industries, or regions.

When you hold individual investments that react differently to stimuli, you minimize your portfolio’s exposure to any one risk, helping to smooth out its performance. For example, if the 澳洲幸运5官方开奖结果体彩网:tech sector takes a hit, having exposure to the 澳洲幸运5官方开奖结果体彩网:health care sector mayꦯ cushion the blow to the stock portion of your portfolio.

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Proactive Tax Planning

You may not think of 澳洲幸运5官方开奖结果体彩网:tax planning as a risk management strategy, but taxes represent one of the more significant threats to your retirement savings. “Some of the most overlooked forms of risk in retirement aren’t market-rela🍷ted; they’re tax-related,” 💝Petitjean said.

Instead of waiting to meet with💜 your accountant until it’s time to file a return, consult with them proactively throughout each year. Petitjean and Townsend emphasized the importance of a long-term strategy to minimize your lifeti﷽me tax liability.

“I am shocked by how many consumers o🎉nly talk to their tax professional after the tax year has already closed,” Townsend said. “It is impossible to properly strategize by being reactive with taxes.꧒”

Proactive tax planning allows you to execute more sophisticated and potentially lucrative strategies. “For example, I often encourage retirees in their 60s and early 70s to consider 澳洲幸运5官方开奖结果体彩网:partial Roth conversions,” Petitjean said.

澳洲幸运5官方开奖结果体彩网:Roth conversions involve transferring funds from a pre-tax retirement account into a Roth IRA. You must pay taxes on the amount transferred in the year you execute the conversion, but you can then withdraw it tax-free from your Roth IRA in retirement.

Roth conversions can help you save by paying taxes on withdrawals while you’re in lower tax brackets. “These can be especially powerful in the years before forced income begins in the form of Social Security, pension income, and 澳洲幸运5官方开奖结果体彩网:required minimಞum distributions (RMDs),” said Petitjean.

Automating Withdrawals

Emotional decision-making—especially 澳洲幸运5官方开奖结果体彩网:panic selling during a downturn—can devastate your retirement savings. An investor who put $10,000 in the S&P 500 in 1995 would have $224,278 in 2024 if they stayed fully invested the whole time, but just $102,750—roughly 54% less—if they took their money out of the market during that period’s 10 best days.

One of the best ways to avoid this mistake is to set up a system that removes emotion from the equation by 澳洲幸运5官方开奖结果体彩网𝓀:🐓automating your portfolio withdrawals. “Most consumers love building the income stream to come in each month, like they are still getting a payche💦ck from their employer,” said Townsend.

Working With a Professional

With so many moving parts in retirement, partnering with a qualified professional who understands the full financial picture can be one of the best ways to maximize your resources. Not only can they help you navigate complex situations, but they can also help make managing your money a more passive experience. That way, y꧙ou can spend your golden years relaxing rather than working in a spreadsheet.

The Bottom Line

Because your 澳洲幸运5官方开奖结果体彩网:investment time horizon shrinks as you age, asset allo🔯cation becomes even more important in retirement. After 70, your focus often shifts from maximizing returns to generating reliable income, but growth investments remain vital. Some exposure is still necessary to stay ahead of inflation and maintain your 💧lifestyle, especially with life expectancy increasing.

One of the best ways to balance growth and income is through the bucket strategy and regular rebalancing. Financial advisors can help you implement these and other risk management strategies, like advanced diversification, proactive tax planning, and automating withdrawals.