FYI: What should we take away from the turmoil this fall in stock markets? Two things: a clear understanding of risk, and the importance of “glide paths.”
No, we aren’t talking about skiing or aircraft, but rather adjusting a portfolio’s stock/bond mix with age, particularly in retirement.
The most venerable method for doing so, the age-in-bonds formula, reduces your equity allocation by one percentage point a year. A 25-year-old, for example, holds 25% in bonds, and thus 75% in stocks, whereas an 80-year-old holds 80% bonds and 20% stocks
Regards,
Ted
http://online.wsj.com/articles/how-to-think-about-risk-in-retirement-1417408070
