Should you change your asset allocation at retirement?

It’s a frequently asked question from investors as they approach retirement. Senior Financial Advisor, Kevin Miller gives his suggestions and explains the retirement glide path.

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Akweli Parker: So now that we’re talking about allocation and risk management, I want to go to this question from Holly in Saratoga Springs, New York. And she asks, “Should I change my asset allocation at retirement?” So, Kevin, I’m sure this is one you get pretty often as well. What is your advice to people?

Kevin Miller: Absolutely. So when we manage assets for clients—the sort of fancy investment term is called the glide path—which is just a systematic reduction in the amount of stock exposure that you have as you get closer and closer to retirement. Usually for us we do it every few years, and so it’s not, something people use more of, I would call it, a cliff approach where you’re a lot riskier; and then when you maybe get to retirement, you see a dramatic reduction. Typically what we’ll do is it’s more gradual over time because what you want to try to do is, let’s say there’s a big market downturn right before you get to retirement and now maybe that impacts whether or not you’re able to retire, so we think you should be in sort of your longer-term asset allocation a few years before you actually get to retirement.

Akweli Parker: So, in other words, not an abrupt change in allocation but more gradual.

Kevin Miller: Exactly.

Important information

All investing is subject to risk, including the possible loss of the money you invest. There is no guarantee that any particular asset allocation or mix of funds will meet your investment objectives or provide you with a given level of income. Diversification does not ensure a profit or protect against a loss.

This webcast is for educational purposes only. We recommend that you consult a tax or financial advisor about your individual situation.

Advice services are provided by Vanguard Advisers, Inc., a registered investment advisor.

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