Retirement Planning Tutorial
Asset Allocation
To determine the right mix of investments in your portfolio is very important. The decision for what percentage of assets you should put in stocks, and the remainder into lower risk instruments like bonds and treasuries, is not an easy one.
Suggested Asset Allocation for your Retirement Account
Your Age |
% of high growth investments |
% of lower risk fixed investments |
20 |
85% |
15% |
25 |
80% |
20% |
30 |
75% |
25% |
35 |
70% |
30% |
40 |
65% |
35% |
45 |
60% |
40% |
50 |
55% |
45% |
55 |
50% |
50% |
60 |
45% |
55% |
65 |
40% |
60% |
The underlying principle of this chart is that the older you get, the less amount of risk you should be exposed. The more that you depend on or the sooner you will need to utilize your retirement savings for income, the more conservatively you should invest because asset preservation is key. However, depending on the size of your savings or the timing of your retirement, it may make sense to invest a portion of your savings more aggressively. If you can afford to take more risk, you can invest a larger portion of your savings in higher risk investments.
Conclusion
This tutorial only scratches the surface on retirement planning. There are financial planners who take years of courses and certifications to become successful retirement planners. The retirement decisions that you make right now will affect you and your family's life in the future.
The most important thing to remember is to set goals and stick to them, avoiding complacency at all cost. Anyone who has experienced true success will tell you the key was setting realistic goals and achieving them at all cost.