How Should Retiree Portfolios Be Allocated?

With longer lifespans, assuring steady income streams for life means that many retirees will have to invest more aggressively to make the money last. How are advisors putting those plans into action?

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Comments (3)
"Then you don't need to worry about eating into principle"

Unless it is a pun, it should be "principal."
Posted by Zvi K | Monday, August 04 2014 at 2:26PM ET
I have been in the business for 45 years and the old ways still work. Asset allocation is based on the age of the account. A 65 year old is 65% fixed income and 35% equity. He/she doesn't have time to make up a mistake. Cash is allocated depending on market. Today 100% of equity allocation is invested; while only 60% of fixed income allocation is invested, allowing for principal risk. Today accounts are not being compensated for fixed income principal risk that will not recover in their lifetime....the cash component will shorten fixed income net duration substantially allowing for a higher rate environment ahead.
Posted by ROBERT J S | Monday, August 04 2014 at 3:11PM ET
For the past 30 years the "age-based allocation" has worked well as interest rates have fallen dramatically, allowing bonds to outperform stocks through that time period. In today's environment, the risk of rising interest rates is a huge cloud. I believe that an allocation of at least 50/50 is appropriate with full diversification between US stocks, international, emerging markets, real estate, natural resources, commodities, corporate bonds, treasuries, international bonds. that type of portfolio has provided superior durability throughout all the negative events of the past 20 years.
TEdd Bell, CFP
Posted by Tedd B | Tuesday, August 05 2014 at 1:09PM ET
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