Asset Allocation Investing Based on Time

Increase Your Retirement Income by Mary Beth Franklin of Kiplinger offers a new twist on how to think about withdrawing from retirement savings. Historically, advisors have used a withdrawal rate of about 4%. The article describes an approach of laddering investment risk by the time segment needed, with the least risky being short term and the most risky being long term.

In this model, near term income needs would be invested in money market funds and CDs. The next time segment would be bonds. Longer time frames would be invested in stocks, covering income and growth, growth and aggressive equity investments depending on the time frame.

Overall, I like this style of asset allocation based on time. While we weren't aware of this specific retirement investing method , we found the approach of keeping short term expense needs (3-4 years) in money market funds and CDs very helpful during the 2008 - 2009 bear market. Thus, when the market turned down, we did not liquidate equity investments at low prices to generate cash for living needs.

At the moment, this type of approach is working for us. However, for this approach to work, the economy and stock market will need to recover over the next few years, which I think is a reasonable assumption for now.

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This is not financial or investment advice. Please consult a professional advisor.

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