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Am I investing in the right types of funds to meet long-term growth goals for retirement?

I am 62 years old and planning on retiring at age 70 and collecting Social Security at that time. My equity allocation is under 20 percent. I am planning on adding with dollar cost averaging $10,000-$12,000 per year for the next eight years in to the following: two growth funds, two international funds, one total stock market index fund, and two balanced funds. I have three years worth of living expenses in cash. This would bring my allocation to 25 percent equities. Is this a good plan to meet long-term growth goals for retirement?

Financial Planning, Retirement, Social Security, International / Global, Mutual Funds
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January 2019

Several others have already provided some solid recommendations for you, so I’ll try to limit my comments toward areas that haven’t gotten as much attention in their posts:


  • 3 years in cash:  This is a fantastic “cushion” that can be tapped if any emergencies or job loss situations arise.  My first recommendation here is to ensure that you have these funds in a savings account that pays a good interest rate.  There are multiple options that you can find online (PNC Bank, Synchrony, Ally to name a few) that pay ~2.00% APY and sometimes more.  Having the cash is great, but you want to keep up with inflation as best you can.  Leaving it in a basic savings earning 0.01% APY is not the way to do this. You can also consider a CD ladder (buying CD’s of varying terms and rates) as an option to further increase your rate and keep up with inflation. 


  • In the event that 3 years of living expenses equates to more than $250k, open savings accounts with multiple banks to keep your balance under the $250k FDIC limit in each account. 


  • Allocation: Having a multiyear cash cushion, in addition to still being employed for several years, gives you the ability to be more aggressive with the allocation of your retirement funds.  8 years to retirement + 3 years in cash + maxing out social security makes it a lot less likely that you would have to pull significant funds from your portfolio in the next 10+ years.  This means that you have the capacity to take on more risk in equities and grow your nest egg.  Whether you have the tolerance for that volatility is something that only you can answer.   Also, the status of your current portfolio relative to your retirement goals would have to be reviewed to more definitively say if you “should” increase your equity allocation.  As others have noted, you may have already accumulated enough assets relative to your goals that being more aggressive doesn’t have clear benefits.  In the football analogy, if you’re up by 40 points with a few minutes left on the clock, is there really a benefit to throwing the ball down the field?

Hope this helps and keep up the great work on your path to financial independence!

January 2019
January 2019
January 2019
January 2019