Northwestern Mutual
< Back to Insights & Ideas

Ask the Retirement Expert: What Is the Proper Asset Allocation in Retirement?

Mark McLennon, J.D., CPA, CFP® •  January 15, 2016 | Enjoying Retirement, Your Finances, Ask the Expert

Each week our Northwestern Mutual retirement experts answer your questions. This week’s question:

By Mark McLennon, J.D., CPA, CFP®

As vice president of Investment Products and Services business development, Mark is the chief liaison for IPS to the company’s Planning and Sales, Advanced Planning, Specialty Markets, Marketing and Meetings functions. Mark’s role also includes oversight of the fee-based financial planning program, IPS meeting development, IPS communications, and overseeing departmental growth initiatives.

What is the proper asset allocation in retirement?

People often think that the magical date of retirement is the time to radically reallocate their assets to acquire more income-generating investments (e.g., increase bonds) and decrease volatility (e.g., fewer stocks). Although it is definitely a time to reevaluate your plan and how all of your assets are positioned, that does not necessarily mean that major changes are needed. (Hopefully, you already have been planning and anticipating this date well before the time comes!)

Determining your specific asset allocation approach in retirement should be done in a similar fashion to how you addressed it when you were saving for retirement: Look at the time horizon of your goals, your risk tolerance and how much access you will need to your money. With life expectancy continuing to increase, inflation is definitely a retirement risk, as your time in retirement may be nearly as long a period as your working years.

When in retirement, you’ll want to make sure you can cover essential expenses during market downturns. Many people use guaranteed income from Social Security, pensions or annuities for this. It may also be a good idea to keep a cash reserve to give yourself some safety during a market downturn. It’s also a good idea to have a portion of your money invested in assets (like stocks) to allow you to take advantage of growth.

Do you have a question for our Northwestern Mutual retirement experts? Click here to send your questions.

No investment strategy can guarantee a profit or protect against a loss. 

Rate This Article