T. Rowe Price Personal Investor - Retirement Savings by Age: What to Do With Your Portfolio in 2024 (2024)

FAQs

How should your investment portfolio change with age? ›

A typical rule of thumb is that the percentage of an investor's portfolio of financial assets that is held in equities should equal 100 minus her age, so that a 30-year-old would hold 70 percent of her financial wealth in stocks, while a 70-year-old would hold 30 percent in stocks.

The conservative allocation is composed of 15% large-cap stocks, 5% international stocks, 50% bonds and 30% cash investments. The moderately conservative allocation is 25% large-cap stocks, 5% small-cap stocks, 10% international stocks, 50% bonds and 10% cash investments.

For example, if you're 30, you should keep 70% of your portfolio in stocks. If you're 70, you should keep 30% of your portfolio in stocks. However, with Americans living longer and longer, many financial planners are now recommending that the rule should be closer to 110 or 120 minus your age.

At age 60–69, consider a moderate portfolio (60% stock, 35% bonds, 5% cash/cash investments); 70–79, moderately conservative (40% stock, 50% bonds, 10% cash/cash investments); 80 and above, conservative (20% stock, 50% bonds, 30% cash/cash investments).

For most retirees, investment advisors recommend low-risk asset allocations around the following proportions: Age 65 – 70: 40% – 50% of your portfolio. Age 70 – 75: 50% – 60% of your portfolio. Age 75+: 60% – 70% of your portfolio, with an emphasis on cash-like products like certificates of deposit.

If you're 70, you'd look at sticking to 40% stocks. Of course, there's wiggle room with this formula, and it's really just a way to get started. And for many older investors, a 50-50 split of stocks and bonds is what's preferred throughout retirement, and that's fine, too.

The safest place to put your retirement funds is in low-risk investments and savings options with guaranteed growth. Low-risk investments and savings options include fixed annuities, savings accounts, CDs, treasury securities, and money market accounts. Of these, fixed annuities usually provide the best interest rates.

There are no set ages to get into or to get out of the stock market. While older clients may want to reduce their investing risk as they age, this doesn't necessarily mean they should be totally out of the stock market.

Some recommend portfolio asset allocation by age, under the assumption that the younger you are, the more aggressive you should be with your retirement asset allocation. That may be true to some degree, but some investors are naturally more conservative than others.

Conventional wisdom says that, in your younger years, you should be investing as aggressively as possible as long as it's not beyond your comfort level. That conventional wisdom is certainly true for retirement accounts like 401(k) plans.

Should I invest in bonds or CDs? ›

CDs are an excellent place to park your cash and earn interest on your balance. Although there's a risk of inflation outpacing CD interest rates, they are virtually guaranteed earnings. Bonds, on the other hand, may deliver higher returns and regular income via interest payments.

Bond funds, money market funds, index funds, stable value funds, and target-date funds are lower-risk options for your 401(k). 23 Each investment type has its own risk profile to consider.

You might consider investing in real estate if you're facing retirement and short of funds. Income property "can be an important bridge to retirement for those without quite enough to retire in the traditional sense," says Jeff Camarda, a real estate investor and CEO of Jacksonville, Fla.

A good plan isn't just about the size of your nest egg. It's also about how you manage these three things: taxes, investment strategy and income planning.

Cash: 8% of assets are kept in cash for years 1 and 2 of retirement. Bonds: 32% of assets are kept in bonds for years 3-10 of retirement. Stocks: 60% of assets are kept in stocks for year 11 and beyond.

Investors in their 20s, 30s and 40s all maintain about a 41% allocation of U.S. stocks and 9% allocation of international stocks in their financial portfolios. Investors in their 50s and 60s keep between 35% and 39% of their portfolio assets in U.S. stocks and about 8% in international stocks.

The common rule of asset allocation by age is that you should hold a percentage of stocks that is equal to 100 minus your age. So if you're 40, you should hold 60% of your portfolio in stocks. Since life expectancy is growing, changing that rule to 110 minus your age or 120 minus your age may be more appropriate.

The Rule of 100 determines the percentage of stocks you should hold by subtracting your age from 100. If you are 60, for example, the Rule of 100 advises holding 40% of your portfolio in stocks. The Rule of 110 evolved from the Rule of 100 because people are generally living longer.

A 70/30 portfolio is an investment portfolio where 70% of investment capital is allocated to stocks and 30% to fixed-income securities, primarily bonds.