I am 73 and my wife is 70 with one son. We have $235,000 in a savings account and we each have $250,000 in Roth IRAs. We also have $1.675 million in a brokerage account and $1.55 million in a 401(k). Everything other than the two Roths are invested solely in stocks and the two Roths are 60% stocks and 40% bonds. With Social Security and pensions, our monthly income is $11,000 and we save about $3,800 monthly. Should we change our brokerage and 401(k) accounts to a 60/40 mix and move some of our savings to money market accounts or bonds?
Understanding the 60/40 Allocation
For many retirees, transitioning to a 60/40 portfolio is a common strategy aimed at achieving a balance between growth and stability. The combination of stocks and bonds can provide long-term growth potential while ensuring a level of income to cover living expenses in retirement. However, in your case, it might not be the most necessary move, considering your financial situation.
Based on your current financial situation and monthly income, you may have room to optimize your asset allocation. Consider seeking the guidance of a financial advisor to better manage and invest your retirement savings.
Pros and Cons of a 60/40 Asset Allocation
The primary reason for holding a 60/40 portfolio in retirement is its balance between growth and stability. Ideally, the stock allocation powers the long-term growth of your portfolio so you don’t run out of money while the bond portion produces income for withdrawals. However, given the details you’ve provided, this may not be entirely necessary for you at this stage of your retirement planning.
If I read your question correctly, you have a guaranteed income of $11,000 per month and save almost $4,000 from that money. It sounds like you aren’t taking regular withdrawals from your savings and don’t need to. If you have $235,000 in a savings account and a total of $500,000 in Roth IRAs already in a 60/40 allocation, that adds up to $735,000 of relatively stable money. That’s a pretty substantial balance of readily accessible money, especially if you aren’t relying on it for regular cash flow. If you want an expert to evaluate your asset allocation or to manage your portfolio, this free matching tool can connect you with up to three financial advisors.
Optimizing Your 401(k) and Brokerage Accounts
You have several good options for the remaining money in your 401(k) and brokerage account. Depending on what you want to do with the money and the purpose it serves, I think you can either leave it invested aggressively or switch to a more conservative allocation such as a 60/40 split.
If what I mentioned above about your cash flow is correct – that is, you and your spouse want to maximize growth with the remaining money – you could leave it invested as it is. You just have to be comfortable with potential market volatility. An aggressive stock-heavy asset allocation will provide a higher expected return that allows you to grow a larger balance over time but it will likely be much more sensitive to market swings.
Optimizing Your Savings
As for your savings, think about where this money currently resides. If it’s in a regular savings account earning something near the national average of about 0.5%, then you’d likely be able to get a better interest rate if you move it to a
