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‘Should I move stocks to bonds?’ I’m 65 and have 82% of my 401(k) in stocks

Loraine Montanye is a financial advisor and certified financial planner (CFP)

In my 401(k) retirement plan, I am 82% stocks. I’m 65 and still working. Should I move my stocks to bonds?


While not a satisfying answer, the real answer is that “it depends.” The decision whether or not to shift your 401(k) to a more conservative asset allocation will depend primarily on your longer-term goals, personal factors of your risk/return profile, and the asset allocation in your other accounts, if applicable. (And if you need help choosing an appropriate mix of stocks and bonds, consider talking to a financial advisor.)

Think about your long-term goals

Before making any asset allocation decisions, I recommend that you first consider your long-term goals for these savings. What do you want to use the money for? Gaining a clear understanding of your longer-term objectives will largely determine your time horizon, risk tolerance and return target, the three inputs that collectively drive asset allocation decisions.

If your goal is to use all of these savings for income when you eventually retire, then your time horizon is your remaining working time plus your retirement years. With this goal and time horizon, you should evaluate your retirement readiness in the context of all sources of retirement income, including your 401(k) plan, other investment and savings accounts, and Social Security.

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If you feel like you’re behind on saving the amount needed to support your desired spending level in retirement, you likely have a higher return goal, as you’ll need to achieve additional growth in your portfolio to achieve your retirement goals. A higher return target is generally associated with taking more risk. In this situation, it may be necessary to prioritize capital growth by maintaining greater exposure to equities. However, if you are confident that the various sources of retirement income can support these expenses, you may have a lower return target, with an emphasis on capital preservation rather than growth. It may be wise to switch to a more conservative allocation in the pension plan.

Perhaps you have built up more than enough savings to enjoy your retirement and you want to pass on part of your assets to future generations. Multigenerational goals require a different view. In this case, maintaining a more aggressive equity-oriented asset allocation could make sense as the time horizon extends beyond your retirement into the next generation(s). (And if you need help setting financial goals, such as retiring at a certain age, a financial advisor can help.)

Consider your personal factors

An entrepreneur checks his finances. An entrepreneur checks his finances.

An entrepreneur checks his finances.

When thinking about asset allocation and risk tolerance, the nature of one’s income stream is often overlooked. If you are a business owner, your wealth likely depends on the stock value of your company. Because business ownership carries an inherent level of risk, maintaining a conservative allocation in your investment portfolio may be justified.

You’ll probably want to take a similar approach if you don’t have a business but your income fluctuates significantly from year to year. Conversely, if your income is very stable, you may have more flexibility to take risks with your investments. Income-based factors are one of the factors that influence your ability to bear risk.

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Health is another factor that contributes to your ability to accept risk. Do you currently have high healthcare costs or do you expect to have to deal with them? If the answer is yes, you may want to lower the risk profile of your retirement plan by shifting certain assets to cash and bonds. However, if you have long-term care or other arrangements in place, you may be able to accept more risk in your portfolio.

It’s also useful to think about your own behavioral approach to investing. This is usually referred to your willingness to accept risk. Are you able to absorb the stock market declines and potentially use them as buying opportunities, as we experienced in 2018, 2020 and 2022? Or did you sell during those challenging periods on the way down? Together, the ability and willingness to accept risk make up your risk tolerance.

The biggest risk to success with a stock-heavy portfolio is selling when the market turns against you. Having the strength to hold positions during volatile periods in the market indicates a greater willingness to accept risk. This can boost your risk tolerance and justify a larger relative equity allocation. (A financial advisor can help you create and stick to an investment plan.)

Check your other accounts

A married couple reviews their 401(k) accounts. A married couple reviews their 401(k) accounts.

A married couple reviews their 401(k) accounts.

It’s critical to then compare your objectives, risk tolerance, and return requirements with your accounts’ asset allocations and ensure they match.

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Investors in their sixties typically keep between 40% and 60% of their invested assets in equities. Keeping 82% of your retirement plan assets in stocks could be a good decision if you own other accounts that are more heavily allocated to bonds and cash. If not, reducing the stock allocation in your 401(k) or other accounts may be helpful. (And if you need more help making these decisions, consider consulting a financial advisor.)

Of course, it is crucial that you align this overall asset allocation with your long-term goals, time horizon and risk/return objectives – age is not the only criterion!

Next steps

While age is an important driver in asset allocation decisions, additional factors should be considered before shifting your portfolio from stocks to bonds. We encourage you to look beyond your age to understand your long-term goals and where you currently are in relation to those goals. It is also important to think critically about other factors that could adjust your personal risk profile and return requirements up or down.

Finally, evaluate your asset allocation holistically, including any other investment accounts you own in addition to your 401(k) plan. Doing this will help you more accurately assess your time horizon, risk tolerance, and return goals, which will help you allocate between stocks, bonds, cash, and other securities in a way that puts you on the best path to achieving your goals.

Tips for finding a financial advisor

  • Finding a financial advisor does not have to be difficult. SmartAsset’s free tool matches you with up to three vetted financial advisors serving your area, and you can have free introductory calls with your advisors to decide which one you think is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.

Loraine Montanye, CFP®, AIF®, is a SmartAsset financial planning columnist who answers reader questions on personal finance topics. Do you have a question that you would like answered? Email AskAnAdvisor@smartasset.com and your question may be answered in a future column.

Loraine is a senior pension advisor at DBR & CO. She has received compensation for this article. Additional author resources can be found at dbroot.com.

Photo credits: ©iStock.com/jacoblund, ©iStock.com/shapecharge

The post Ask an Advisor: ‘Should I Move Stocks to Bonds?’ I’m 65 and Have 82% of My 401(k) in Stocks appeared first on SmartReads from SmartAsset.

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