Need to gear towards retirement, what percentage breakdown?

[TheQuestionGuy]

Figured there were two positions. Not retired then Retired and Funds allocation differ for each.

Apparently there is another stage I am learning about which is important especially when the market isn't doing as well.
Figure 2 years from FIRE and should be resetting the portfolio.

I have a game plan for retirement allocation and even a withdraw strategy but nothing prepped for that supposed 2-5 years right before retirement.

In retirement, I plan to use the Growth and Income but from what I am reading Income Funds aren't as significant in pre-retirement but good for retirement.

Currently still heavy in Tech Stocks and Funds.
Don't want to totally eliminate Growth.

The questions are for the 2 years before retirement, what is the rule of thumb for a portfolio?
What type of breakdown between Funds?
Market Index Funds -50%
Growth Funds. 30%
International Funds 10%
Bond Funds 10%

 

[COcheesehead]

Kitces calls it the retirement red zone. You want to devote a portion of the portfolio to capital preservation to address SORR. So anything with smaller standard deviations is good. That can be cash to par value investments to less volatile equities. Just depends what you want. I laddered muni bonds because of the par characteristic and because of my tax situation. Enough to cover at least 2 years, some say 5 years. I laddered 10 years.

 

[YellowSubmarine]

Figured there were two positions. Not retired then Retired and Funds allocation differ for each.

Apparently there is another stage I am learning about which is important especially when the market isn't doing as well.
Figure 2 years from FIRE and should be resetting the portfolio.

I have a game plan for retirement allocation and even a withdraw strategy but nothing prepped for that supposed 2-5 years right before retirement.

In retirement, I plan to use the Growth and Income but from what I am reading Income Funds aren't as significant in pre-retirement but good for retirement.

Currently still heavy in Tech Stocks and Funds.
Don't want to totally eliminate Growth.

The questions are for the 2 years before retirement, what is the rule of thumb for a portfolio?
What type of breakdown between Funds?
Market Index Funds -50%
Growth Funds. 30%
International Funds 10%
Bond Funds 10%

Rule of thumb? Stay in your comfort zone and stay with the plan. Being retired 2011, I balance for income, growth, taxes. Here's my comfort zone thus far.

 

[Midpack]

There is no rule of thumb, depends on your personal risk tolerance and how well funded you are/will be. Many people reduce equity exposure with age, but if you’re overfunded you can decrease risk - what Dr Bernstein called ‘once you’ve won the game, why keep playing?’ e.g. reduce risk if you want. OTOH if you’re overfunded, you can elect to take more risk, and still have adequate funding even if the market goes through a downturn. What allows you to sleep at night is unique to you…

 

[VanWinkle]

If you have enough, play it safe the 3 years before and 3 years after retirement. Safe can be 50/50 or even 40/60. After that, you will get
a better feel for how risky you want to be. I think 90/10 is too risky, but I
am not you.

Best to you,

VW

 

[FD1000]

Figured there were two positions. Not retired then Retired and Funds allocation differ for each.

Apparently there is another stage I am learning about which is important especially when the market isn't doing as well.
Figure 2 years from FIRE and should be resetting the portfolio.

I have a game plan for retirement allocation and even a withdraw strategy but nothing prepped for that supposed 2-5 years right before retirement.

In retirement, I plan to use the Growth and Income but from what I am reading Income Funds aren't as significant in pre-retirement but good for retirement.

Currently still heavy in Tech Stocks and Funds.
Don't want to totally eliminate Growth.

The questions are for the 2 years before retirement, what is the rule of thumb for a portfolio?
What type of breakdown between Funds?
Market Index Funds -50%
Growth Funds. 30%
International Funds 10%
Bond Funds 10%

If I understand correctly, your question is about a 90/10 stocks/bonds portfolio, 2 years prior to retirement.
What can go wrong?
A lot.

My rule of thumb for people who have enough:

1. Be more conservative than you think from 5 years prior to retirement to 5 years after and/or to age 70.
Example: If you think that 70/30 is your comfort zone, go with 50/50. SORR is extremely important.

4 Methods of Reducing Sequence of Returns Risk | White Coat Investor

When you're about to retire (or if you've just retired), you need to be aware of the biggest risk you have—the Sequence of Returns Risk.

www.whitecoatinvestor.com

2. Increase risk (1%) slowly after age 70. If you were in 50/50 at age 70...at age 71, go with 51/49...age 72, go with 52/48.

3. Breakdown:
Index funds
Forget about growth and international stocks and/or typical bond funds and find great risk-reward funds.
A name of a fund or its prospectus is just BS, what matters is the actual performance and volatility.

4. How to test your risk tolerance? I looked at the past at the worst times and saw how my selected portfolio has done.
Example: The SP500 was down over 50% and international even more from peak to trough during 2007-9.

I believe that risk, volatility, and effective strategies for managing them are some of the most misunderstood concepts in investing, even among professionals.