However you look at it, your asset allocation—the mix of stocks, bonds, and cash in your portfolio—is  just as important as you approach retirement as it was while you were building your nest egg. Extensive Vanguard research has shown that 91% of your portfolio’s long-term return can be traced back to your asset allocation.*

Developing your asset mix

Kimberly Stockton
Kimberly Stockton

By mixing investment types, you lower the overall risk in your portfolio, since stocks and bonds usually perform differently at any time. The way you divide your portfolio among the asset classes gives you a certain amount of control over the experience you’ll have as an investor—how much risk your portfolio is exposed to as well as its potential returns.

There’s no “best” asset allocation for retirees, according to Kimberly A. Stockton, investment analyst in Vanguard Investment Strategy Group. “Common rules may frame a starting point, but your asset allocation really begins with you—what makes you comfortable and gives you a good chance to meet your goals,” she said.

Here are some questions to consider

  • What are your goals? Think about your lifestyle in retirement and what you want to do with your money—perhaps travel, help a charity, or set aside an inheritance for your family.
  • Can you tolerate risk? Markets are volatile and sometimes it’s hard to stay the course, particularly during setbacks like the severe market downturn of 2008.
  • How much risk can your portfolio withstand? In the years leading to retirement, position your portfolio so that it can weather a market downturn when you retire. You don’t want to have to significantly alter your retirement plans because of a rocky market.
  • What’s your time horizon? You may not need to spend from your investments as soon as you retire. If that’s the case, figure out when you’ll start making withdrawals. And be sure to consider your health and your family’s health history when gauging your life expectancy.
  • Do you have other available resources? Take stock of other income resources you may have, such as pension plans, real estate, Social Security, and annuities.

“We believe life changes, not market changes, should drive your asset allocation as you transition into retirement,” added Stockton. “The preretirement years are a good time to evaluate your financial goals, time horizon, and risk tolerance so that when you do retire, you’ll be in a position to enjoy the life you’ve planned.”

Kahlilah Dowe
Kahlilah Dowe

Making the most of your investments

Because you have no control over market returns, inflation, or your life expectancy, developing a suitable asset allocation using broadly diversified funds is the key to your portfolio’s ability to meet your retirement needs, says Kahlilah Dowe, a senior financial advisor in Vanguard Personal Advisor Services®.

Invest too conservatively and you run the risk of not having enough money through your retirement years. Be too aggressive and you risk losing more than you can make up during a market decline.

“Basically, you’ll need to figure out how you’ll balance the 3 parts of asset allocation,” said Dowe. “Bonds can help you weather the market’s ups and downs, stocks can help your portfolio grow, and you’ll need enough cash to meet your spending requirements.”**

We can help you get it right

Asset allocation is just one of the many important decisions to make before retirement. If you’d like professional help, our advisors can create a customized financial plan for you, taking into account your personal goals and situation.

We’ll then manage your assets according to your plan, advising you on decisions such as when to take Social Security and how to withdraw from your retirement accounts. Then you’ll be free to spend your retirement years doing the things you really love.

Learn more about Vanguard Personal Advisor Services >>

*Source: Brian J. Scott, James Balsamo, Kelly N. McShane, and Christos Tasopoulos, 2017. The Global Case for Strategic Asset Allocation and an Examination of Home Bias. Valley Forge, Pa.: The Vanguard Group.

**We assume a conservative asset allocation corresponds to a 20% stock/80% bond portfolio, a moderate allocation corresponds to a 50% stock/50% bond portfolio, and an aggressive allocation corresponds to an 80% stock/20% bond portfolio.


All investing is subject to risk, including the possible loss of the money you invest.

Diversification does not ensure a profit or protect against a loss.

Be aware that fluctuations in the financial markets and other factors may cause declines in the value of your account. 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.

Advice services are provided by Vanguard Advisers, Inc., a registered investment advisor, or by Vanguard National Trust Company, a federally chartered, limited-purpose trust company.

We recommend that you consult a financial advisor about your individual situation.