How Should Retirees Be Invested?

by | Feb 11, 2022 | Blog, Videos

The common investing belief for retirees is that they should invest more conservatively as they get older.

In this week’s video, Casey discusses asset allocation, rebalancing and how retirees might want to think about their different asset “buckets”.

Show Notes

Older Investors Have a Lot of Money in Stocks. How to Check if it’s Too Much – The Wall Street Journal

How Should Retirees Be Invested? – Full Transcript

**Click here for a full downloadable PDF of this transcript**

Casey Mullooly: In episode 280, we balance things back out.

Welcome back to the Mullooly Asset Show. It’s me, Casey Mullooly. Thanks, as always, for tuning in for episode 280. This week, we’re going to talk about a recent article from the Wall Street Journal, which talks about how retirees have more in stocks than they should, according to the financial advisors they interviewed for the article.

So they pulled data from Fidelity, which said that 40% of investors, age 60 to 69 have 67% or more of their portfolio in stocks. And retail investors at Vanguard in the age 65 to 74 bracket, 17% of those investors have 98% of their portfolios in stocks. They’re fully invested at that point.

Those are pretty crazy statistics, because usually the norm is, as you get older and you retire, you become more conservative with your investment allocation. So I think a lot of people were surprised earlier this year, when the market got off to a rocky start. We fell about 10% to start the year. We’ve clawed some of that back at the date we’re recording this, we’re in mid-February right now.

Casey Mullooly: But I think a lot of people were surprised and were just like, “Whoa, what’s going on here.” So we’re in the beginning of the year here, and this is a good time to take stock of where you are, take stock of how much risk you’re taking and whether or not that is appropriate for your goals or your time horizon.

One of the reasons why your portfolio’s allocation can get out of whack is because of really good performance, like we’ve seen the last two years. So these retirees at Fidelity, at Vanguard, maybe they’re set and forget, and they just haven’t wanted to look at it. But the stock portion of their portfolio has done really well.

And it’s kind of outweighed the bond side of their portfolio. Look, you shouldn’t rebalance just because the stock market is falling. You should have a systematic process, if you’re doing this on your own. Check in once, twice, every quarter. That’s really up to you.

Casey Mullooly: And when we’re talking about rebalancing, we’re talking about asset allocation, where you have set percentages of your portfolio that you want in stocks, bonds, cash, or other investment areas. You can do 50/50, 60/40, 70/30. The choice is really up to you, your risk profile, your goals and your tolerance, but you’ve got to be paying attention to this stuff.

The mix of stocks and bonds is critical, especially for retirees that are drawing down their portfolio. We like to take, what we call, a buckets approach, where money in the next five or so years that is going to be spent, that’s earmarked for spending, is money that is in more conservative investments, like bonds. Because that’s money that you’re spending, so we don’t want to have it at risk in the market.

It also frees you up to look at the stock side of your portfolio and be like, “I’m not touching that for five years. I don’t care what it does. Let it do its thing.”

Casey Mullooly: So, that’s our approach. If you have questions about rebalancing what your asset allocation should be, get in touch with us. We’d be more than happy to help you out and point you in the right direction. That’s going to wrap it up for episode 280, the Mullooly Asset show. Thanks, as always, for tuning in. We’ll be back with you next week.

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