Asset Allocation for Retirement

Asset Allocation

Last week, I discussed the importance of making an asset allocation by age. In this post, I was explaining my “ideal” asset allocation according to your age. From the age of 51 until 65, I suggested investing in a balanced portfolio. This includes having 50% of your portfolio “at risk”. Why would you invest so much in equities when you are about to retire? There are some reasons why asset allocation for retirement should be relatively aggressive:

#1 You didn’t save enough when you were younger

The very first reason why your asset allocation for retirement should contain about 50% in stocks or index ETFs is because you may not have saved enough throughout your life. Therefore, low investment returns (such as 3-4%) won’t be enough to create a comfy nest egg. You will need to reach for a 5 to 6% investment return in order to retire early and happy! If you secure your asset allocation in bonds, you won’t be able to make it. This is why around 50% of your investments should be related to stocks in the decade before retiring.

#2 You will live longer than you think

There are 2 major mistakes people commit when they do their retirement planning:

a)      They overestimate their investment return

b)      They underestimate their life expectancy

While overestimating the investment returns (thinking you will be making 7-8% over the next 20 years) is an obvious mistake, many think they need money until they are 80 or 85… Well chances are that you will live until 90, 95…maybe even 100!

If you live until the age of 90, you need a much bigger investment portfolio than if you didn’t think you will see the sun after the age of 80. Here again, you will need to count on a higher investment yield to support your lifestyle. Modifying your asset allocation for retirement is about one of the only things you can do to make sure you have enough money.

#3 You won’t withdraw all your money in the first 5 years

Many people think that once they retire, they must invest in very secure investment vehicles. They are about to withdraw money from their investments and they fear any fluctuations. This is usually why they make the mistake of playing around with the asset allocation upon retirement. This is a very bad move!

When you look at it bluntly; you will be withdrawing money from your investments during the next 20 to 30 years. Therefore, there is no rush to change your asset allocation for a more conservative portfolio. A good asset allocation for retirement will be one that:

a)      Will be flexible (so you can withdraw money on a steady basis)

b)      Will protect your capital against inflation (so you don’t lose your buying power over time)

c)       Will ensure you have enough money throughout your retirement! (so you don’t have to go back to work!)

Asset Allocation For Retirement – Sharing my model

I will go a little bit further with determining your asset allocation for your retirement by providing a model. Personally, I would start by creating a 45% fixed income, 55% equity portfolio with more aggressive investments in the fixed income portion if you are between 50 and 65;

25% of your investments in municipal bonds or mortgage funds

This will give you a solid base with little fluctuations. The fact that you are mixing mortgage funds with bonds will protect you from the risk of interest rate increases (as mortgage funds have shorter durations than bonds).

20% in a dividend ETF or stocks along with preferred shares or high yield bonds

This part of your asset allocation will still count as fixed income but will definitely run into some variations. If you are not too sure about dividend investing, I suggest you take a look at What is a Dividend, a reference for beginner dividend investors.
20% in US index ETFs

The US market is probably the most diversified and effective stock markets in the world. You can find very good companies that operate all over the world. While it hasn’t given much to its holders during the past 10 years (mostly because of the 2008 crisis), I think that the next 10 years will be different!

15% in Canadian index ETFs

Most investors are advised to invest a part of your account in commodities. While I don’t like commodities and would rather invest in companies, I am picking the Canadian market in my retirement asset allocation. Why? Because a great part of the Canadian economy is driven by different resources such as oil, gas, gold and paper. Buying the Canadian index is like buying commodities without taking all the speculative risk on your shoulders.

10% in International index ETFs

Since the beginning of this retirement asset allocation model, we have discussed nothing but North American investments. I think that having a part invested in the international market wouldn’t hurt either!

10% in Emerging Market ETFs

Finally, emerging markets should be part of any retirement asset allocation model. Why? Because you will probably live as a retiree for 20, 25 even 30 years. This is why you need some sources of growth over the long term. Emerging markets seem to be the perfect investment vehicle for that!

What do you think of my retirement asset allocation? Do you find it too aggressive? Would you be comfortable with such an asset allocation?


Look Good at Work and Become Indispensable Become an Excel Pro and Impress Your Boss


15 Feedbacks on "Asset Allocation for Retirement"


_There won’t be any slices in reward and pension, nevertheless maturity would be few,_ Dinkic, that is likewise great of the entire United Regions of Serbia (URS), claimed for Belgrade-based daily Vecernje Novosti.

roth ira's

Let’s start learning the way you go about doing the transfer.
And rightfully so, it had been the only one
I agreed with. Faults that might take some money on
your retirement account could be prevented should you follow
this caution. An IRA can be considered as being a long-term investment because of its purpose of being held for that
life following retirement. The American Silver
Eagle plus the Mexican Silver Libertad bullion coins, introduced in 1986
as well as 1982 correspondingly, happen to be made of 99.


The Commission has this morning proposed that as of 2013,
as of now, you could be driving home in your dream car.
Here, we will show you how to use the equipment to
make european union 2013 you a photographer. Burtraw, let me commend and thank
my colleagues whose efforts established this project. You’ll be able to pay for the allowance.

asset management executive search

And even more importantly, they know how to play down their flaws so that
all you see when you look at them is 100% assets.
Although there are many people that end up having to
fight tooth and nail to try and get the money back that is owed to them from loans that people have taken out, there are many times that even this does absolutely no good at all in helping them recover their
funds. Through extensive research and studies,
the Search Institute came up with 40 Developmental Assets that every child should have.

_____ _______

Horsepower increasing additions such as turbo charging and super
charging have become common place. There is also another body,
the International Lubricant Standardization and Approval Committee (ILSAC), jointly set-up by US
and Japanese motor manufacturers, which also recommends motor oil grades which comply with the API standard.

According to the federal government’s Magnusson-Moss Act a manufacturer can’t tell
you what specific product you must use to save your warranty they can only tell you
what standards that the product you do use has to live up to.

where to buy india boutique dresses

Women all over the country go out via the day so the norm, they
will increasingly work located in what before
certainly male dominated industries. The website offers a wide variety of hair clips, flowers, baby bows, headbands, french clips,
and cheer bows for females of all ages–babies, toddlers, girls, teens, and women.
Kristen Stewart decided to wear this(1) dress to a Hollywood
event recently.

deck box storage walmart

Yet he chose to ask me so many questions about how and why I do things, because he
could see the profound insight I had built up due to going my own way with my own research and testing
over the past 7 years. The largest inland body of water
found in Maryland is Deep Creek Lake. If you’re worried about your stored
wine going bad in the heat of your boat, you
need to invite me over.

Best Deck Stain Reviews

2 bunches green onions, chopped with some green included.

Cooking and Picking Crabs Before cooking, rinse crabs in freshwater, making sure they are all alive.
I remember being very careful never to rub my paddle
against the gunwale for fear of disturbing
the stillness of the cathedral.

marketing mix

Another way you can update your site is to regularly check and improve upon your website’s
SEO status. When your site is linked by another reputed business, it helps the search engines find you.
You could offer this free chapter as a bonus for signing up to your

bodycon dress boutiques

Any type of gold chain, ring, or earrings, can give
someone a relaxed style, and also look very trendy for this season. Vintage jewelry was the charm and
retro designs mixed with modern looks were another hit
style in jewelry. It won’t be long before you can move
up into the world and have these same people, schools and agencies calling you to set up glamour photography or fashion photography sessions to meet their needs and purposes.

boca raton financial advisor jobs salary

Take for instance a company that for the current period has more
outstanding payables than they do receivables.
But there is an exception if the caregiver is your
parent. Validation

elastic bandage dressing

If you can’t might wear a fabulous mask, compared to step will probably
rule out the intense dress fancy dress outfits
that are dependent on masks. Before you start placing orders you would want to
test out the local. When we talk about celebrities, the
first thing that strikes our mind is their living,
family, clothes, hairstyles, eating habits, holiday destinations and
a lot of things that you could think of.

deck pioneer woman freezer meals

She has a charm that is slightly reminiscent of the childhood favourite Rosie and Jim’s Ragdoll, with a modernized interior to suit the 21st century traveller.
Methods for baiting a hook – Step 5: Use them for fishing.
If you’re worried about your stored wine going bad in the heat of your boat,
you need to invite me over.

chest freezer bait tank

Running the compressor of the above room air conditioners
involves high electricity consumptions and bills.

Cooking and Picking Crabs Before cooking, rinse crabs in freshwater, making sure
they are all alive. Anyway, after all that the judge
abruptly stated that he found me to be an expert in my field
and asked both attorneys if they had any objections.

online weight loss help

Make sure to buy your h – CG injections, drops, or sublingual
pills from a certified doctor. Believe it or not, many dieters claimed that you can see
the result in less than a week; you can actually loss 1 to 3
pounds each day. Program focus is on all round change in life-style as
opposed to a short term eating plan modification.