Play It Safe With Investments As You Age

August 16th, 2007  |  Published in Asset Allocation

The recent stock market peaks and valleys have probably given your heart a bit of workout lately huh? This is probably especially true, the heart workout part that is, if you’re close to retirement and underscores the reason why you should try to shift your investments to less volatile vehicles as you get closer to when you’ll start needing the money. If the volatility is worrying you and you’re about the retire, use it as a wake-up call that you should adjust your allocations.

Are you concerned you’re going to get too conservative? There’s some great actionable advice from CFP Steven Kaye. First, consider your risk tolerance and then use that to figure out how much of your retirement fund you’ll want in equity (stocks) and how much you’ll want in income producing vehicles. Here is what you should do based on your risk profile:

For his clients with an aggressive risk tolerance, he makes sure they have five years’ worth of cash flow in fixed income. For clients with a moderate risk tolerance, he sets aside eight years’ worth. And for the conservative, he makes it 10, more if they’re ultra-conservative.

  

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