Retirement Investment Diversification

For retirees deciding on an investment mix can be difficult. How you diversify, and how much you decide to put into each type of investment is called asset allocation. For example, if you decide to invest in stocks, how much of your retirement nest egg should you put into stocks: 10 percent … 30 percent … 75 percent? How much into bonds and cash? Your decision will depend on many factors including how much time you have until retirement if you have not already retired. Also, even if retired consider our life expectancy, the size of your current nest egg, other sources of retirement income, how much risk you are willing to take, and how healthy your current financial picture is, among others.

Your retirement asset allocation also may change over time. When you are younger and retiring early, you might invest more heavily in stocks than bonds and cash. As you get older and enter full retirement, you may reduce your exposure to stocks and hold more in bonds and cash. You also might change your asset allocation because your goals, risk tolerance, or financial circumstances have changed. You don't want your retirement nest egg at high risk as you don't have a much time to recover from losses as you did while still working.