That old wives’ tale about owning your age—in percent terms—in bonds? It’s not written in stone.
A better idea, says Barry Armstrong, a financial planner and host of “Money Matters” on WBIX 1060 in Boston, is to make sure that you have five years of income in something safe like a stable-value fund, capital-preservation fund, money market or Treasury bonds, and keep the rest of the money growing.
“Just because you’re 70 doesn’t mean you can afford to play it safe – you can’t!” Armstrong says. “You can’t get by on a 2- to 3-percent return.”
Don’t be afraid of volatile markets, says “You Can Afford to Retire” author Michael Kresh, “While you’re accumulating money for your retirement, volatility is your friend.”
You should also to take into consideration how the world has changed.
“Your parents’ rules for retirement no longer apply,” says Randy Carver, president of Carver Financial Services in Mentor, Ohio. “Not only are people living longer but they’re spending more in retirement. That’s why you need to make sure it’s allocated to grow.”
Also, think about increasing the amount of international assets you’re holding.
“Fifteen years ago, the U.S. was 70 percent of the global market cap. Today it’s 28 percent and falling,” says Bruce Fenton, founder of Atlantic Financial in Norwell, Mass., who recommends blossoming markets such as India, China, Latin America and the Middle East.
Carver agrees, suggesting at least 20 percent of your long-term retirement savings be in international holdings.
Plus, there’s the issue of quality. “If your perfect mix is 60-40,” Geraghty says, “It may be 80-20 or 50-50 based on the quality of the funds offered by your 401(k) plan.”
If your 401(k) doesn’t offer a lot of fund options, you should consider contributing enough to get your employer’s maximum match and put the rest of your money in a separate retirement account with complimentary holdings that, when combined, meet your allocation goals.
If that seems overwhelming, then ask your financial advisor if he is willing to take on managing your 401(k) for an extra fee.
“If you don’t take care of yourself financially,” says the author of “This Is Not Your Parents' Retirement," Patrick P. Astre. “you’re going to see your own personal misery index go through the roof."
(This story has been updated since it was first published April 25.)