Investing in Your 50s? Bonds May Not Be the Answer

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As investors approach retirement in their 50s, they may be tempted to shift their portfolios to be more conservative by adding bonds. However, financial advisors caution that a one-size-fits-all approach to investing in bonds is not always the best strategy. Factors like when you'll need the money, your investment goals, and your risk tolerance should all be considered when determining the right asset allocation.

Why it matters

With people living longer and retiring later, the traditional advice to shift to bonds in your 50s may no longer apply. Experts say a more personalized approach is needed to ensure your investments are aligned with your specific financial plan and goals.

The details

Certified financial planner Scott Bishop warns against relying too heavily on rules of thumb like subtracting your age from 100 to determine your fixed income allocation. He says this doesn't account for an individual's unique liquidity, growth, and stability needs. Flavio Landivar, a senior financial advisor, also distinguishes between 'risk tolerance' and 'risk requirement,' noting that the asset allocation should be driven by one's financial plan, not age alone. Advisors recommend considering when you'll need to access your money, and using strategies like the 'bucketing' approach to mitigate sequence-of-returns risk by separating funds into cash, low-risk investments, and long-term investments.

• Investors in their 50s are typically nearing retirement but still have a few years in the workforce.

What they’re saying

What’s next

Investors in their 50s should review their financial plan and work with a financial advisor to determine the appropriate asset allocation based on their individual goals, risk tolerance, and time horizon until retirement.