Retirement Account Asset Allocation
The 25-year-old asset allocation would be more aggressive at first. Buying equities that are extremely volatile is a risk vs. return kind of situation. Additionally, the risk tolerance of a 25-year-old should be substantially higher given the time until retirement. A 60-year-old asset allocation is likewise likely to be cautious, consisting of more cash and bonds and less volatile investments. Our capacity for risk declines as we age and come closer to retirement. The closer we approach retirement, the more we want to save.
Many of these recommendations have altered when we consider asset allocation and risk tolerance, as well as the state of the global economy now. I am aware of 25-year-olds who have already begun investing for their future using a more cautious strategy. They are making investments in bonds and gold, for example. On the other hand, 60-year-olds have suddenly been forced to raise their risk tolerance and deploy some of their assets into places they typically would not due to the wild economy we’ve been going through the past few years. These actions are considered attempts to partially make up for losses incurred, and they are 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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