Loraine Montanye works as a financial consultant and is a certified financial planner (CFP)
With my 401(k) pension fund, I hold 82% shares. I am 65 years old and still employed. Should I consider transitioning my investments to bonds?
-Bob
The answer to whether you should adjust your 401(k) to a more conservative asset mix will vary based on your long-term objectives, personal risk/return profile, and the asset distribution in your other accounts if applicable. (If you require assistance in selecting a suitable blend of shares and bonds, you may want to consult with a financial advisor.)
Contemplate Your Long-Term Objectives
Prior to making any decisions regarding asset allocation, I recommend reflecting on your overall aims for these savings. What are your intentions for these funds? Obtaining a clear understanding of your long-term goals will significantly influence your time horizon, risk tolerance, and return target, the three factors that collectively guide asset allocation decisions.
If your objective is to depend on these savings for income during your retirement, then your time horizon will encompass the duration of your remaining employment years and your retirement phase. Given this objective and time frame, you will need to assess your retirement readiness considering all potential sources of retirement income, such as your 401(k) scheme, other investment and savings accounts, and Social Security benefits, among others.
If you believe that you are lagging behind in amassing the necessary sum to sustain your desired spending level in retirement, you will likely have a higher return target, requiring additional portfolio growth to progress towards your retirement objectives. A higher return target typically entails assuming greater risk. Focusing on capital appreciation by retaining a higher exposure to shares may be crucial in this scenario. Nevertheless, if you are confident that your various sources of retirement income can cater to your spending needs, you might aim for a lower return goal emphasizing capital preservation over growth. Shifting to a more conservative asset mix in your retirement account could be advisable.
It could be the case that you have amassed more savings than necessary to support your retirement and desire…
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