Rethinking retirement allocations

Older Americans staring at retirement in the face are finding it hard to save. So how does the millennial generation -- which faces a struggling economy and high student debt -- feel about life after work?

Maybe they're things your mother and father drilled into you, or maybe you stumbled through some personal finance mistakes before you found them. But, no matter how they were instilled, there's little rules we keep in the back of our minds when it comes to matters of money.

Occasionally, we find out that those rules aren't as rigid as we once thought.

Tara Siegel-Bernard, writer for the New York Times, recently examined a new report that turns some advice on its head.

The traditional belief is that retirees should keep the majority of their retirement portfolio in the stock market. That can be risky, as we saw in 2008 and 2009. The new study, however, found that relying on the stock market isn't always the best option. 

A better choice? Keeping as little as 20 percent in stocks, while the rest goes to bonds, which are usually more stable. Retirees are also much less likely to run out of money when they rely on bonds during retirement.

"There is a catch," Siegel-Bernard says. "In this case, retirees would need to continue to buy stocks over the course of their retirement -- probably about 1 percentage point more a year."

Siegel-Bernard says this strategy makes sense because when you retire matters.

"Retirees are most vulnerable at the beginning of their retirement," Siegel-Bernard says. "If you retire in a year like 2008, and the market crashes, you have to begin pulling money out just when your portfolio has been quartered or halved. So you're basically locking in your losses."

About the author

Lizzie O'Leary is the new host of Marketplace Weekend.

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