#AskFarnoosh: Getting ‘Serious’ About Retirement

This Friday, I’ve chosen a retirement question asked on Twitter that is, likely, on many baby boomers’ minds.

@Kesjv81d (aka Victor) asks me: 

I’m 50. At what age should you start moving investments to a safer place? 

Dear Victor,

For this, I consulted with Stephany Kirkpatrick, the director of financial planning for LearnVest.com, a Web site that integrates budgeting, investment and planning tools. She says 50 is the right age to get more serious about retirement planning and minimize your exposure to risky investments.

“At that age, the average American is probably 10 to 15 years out from retirement,” she says. “The time horizon is short enough that you should be cognizant of how much risk you’re taking on.

Now’s a smart time to review your portfolio’s allocation and make necessary adjustments if you’re overexposed to the stock market. Kirpatrick calls this “realigning your risk.” And you should do this at least twice a year – no matter your age.

One rule of thumb you may have heard about is to take the number 110 or 100 and subtract your age to determine the percentage of stocks suitable to have in your retirement portfolio. So at age 50, for example, you may not want more than 50% to 60% of your holdings in stocks. Kirkpatrick, however, is a bit more conservative. “Typically, 10-15 years out you should have less than 40% in stocks or other risky investments,” she says. Why? “Many people are living longer than expected. You could experience higher expenses for things like healthcare, or inflation could rise like we’ve never seen before, reducing your buying power,” she points out.