New Look at Asset Allocation for Retirees


Tony Daltorio Image Tony Daltorio Editor, Investors Alley Premium Digest

When suggesting a sample allocation for a 66-year old retiree, I think it is wise to tread a different path from what Wall Street tells you when it comes to stock allocation, suggests Tony Daltorio, editor of The Growth Stock Advisor.

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When I began my career in the investment industry, the general “rule” was that the allocation to stocks should be 100% minus your age. Then it became 120% minus your age.

I think today it's to be 100% invested in stocks even 10 years after death. Just kidding, of course. I would tell people the smart move was to drastically lower their stock allocation in the 2-3 years before retirement and the 2-3 years after retirement.

That way your capital is preserved at the most crucial time in your investing lifecycle. For example, if the stock allocation in a portfolio was at 60%, I would recommend a steep drop to around only 20%.


Consider that a 25% drawdown would almost certainly end your dreams of a nice retirement. In that case, your $100,000 portfolio would suddenly be worth only $75,000. Then you would need to earn a 33% return (which likely would take years) just to get back to even.

Keep in mind too that between October 2007 and March 2009, the S&P 500 index lost 55% of its value.