Retirement Account Asset Allocation
Initially, you would think the 25-year-old asset allocation would be more aggressive. Investing in highly volatile stocks, you know, the risk versus reward type of scenario. Plus, the 25-year-old risk tolerance should be much higher, considering they have a long way to go before retirement. We would also assume that a 60-year-old asset allocation tends to be conservative, with more cash and bonds—fewer volatile investments. As we get older and closer to retirement, our risk tolerance decreases. We want to hold on to our money the closer we get to retirement.
When we look at asset allocation and risk tolerance, and given today’s world economy, I feel many of these recommendations have changed. I know 25-year-olds who have already started investing in their retirement and using a more conservative approach. They are investing in things like gold and bonds. On the flip side of the crazy economy we’ve been experiencing the last few years, 60-year-olds have now had to increase their risk tolerance and allocate some of their assets into areas they traditionally would not. These moves are seen to try and recoup some of the losses they’ve experienced, and they’re more long-term investments.
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How would a 25-year-old’s recommended retirement account asset allocation differ from a 60-year-old’s when it comes to a mix of stocks and bonds?
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