Why Keeping Growth in Your Portfolio After 70 Is Crucial for Your Financial Health

Many retirees adopt a conservative investment strategy to help ensure they have enough income to support themselves. The “100 minus age” rule, a popular guideline, suggests subtracting your age from 100 to determine what percentage of your portfolio should be invested in stocks.

But with life expectancies rising, many experts recommend more growth-oriented formulas, like 110 or even 125 minus age. In other words, exposure to growth assets is becoming increasingly important for outpacing inflation and maintaining your lifestyle. Let’s explore how proper asset allocation can help you strike the right balance between income and growth after 70.

Key Takeaways

• Asset allocation is the division of your portfolio among asset classes—like stocks, bonds, and cash—to manage risk and meet your goals.
• For retirees, asset allocation is typically about balancing short-term income needs with long-term growth to stay ahead of inflation and maintain your lifestyle. 
• The bucket system divides your portfolio into shorter- and longer-term buckets, providing more customization than preset allocation funds, but less convenience.
• Rebalancing helps you stay aligned with your target allocation by periodically selling overperforming assets and buying underperforming ones.
• Other valuable risk management tools in retirement include diversification, strategic tax planning, and automating withdrawals to avoid emotional decisions.

Understanding Asset Allocation for Retirees

Asset allocation refers to how you divide your investments among asset classes, primarily including stocks, bonds, and cash or cash equivalents. The ratio between these categories is one of the most significant determinants of your portfolio’s risk and return profile, as each asset class has distinct advantages and drawbacks:

• Stocks offer the best long-term growth potential but are volatile in the short term.
• Bonds produce more stable income but tend to grow more slowly than stocks.
• Cash equivalents provide the most stability but may not keep up with inflation.

As you move through different life stages, your ideal asset allocation usually shifts. When you’re younger, you can often afford to focus on growth and maximizing returns since you have plenty of time to recover from market downturns.

Once you approach retirement, you have less time to ride out volatility. By your 70s, achieving optimal asset allocation is less about maximizing returns and more about preserving your savings so they can support your day-to-day life.

Example

Someone in their 20s might pursue an aggressive portfolio, with 80%–100% stocks, 0%–10% bonds, and 0%–10% cash and equivalents. Someone in their 70s might adopt a conservative portfolio, with 60%–65% in bonds, 25%–30% in stocks, and 5%–15% in cash and equivalents.

The Role of Growth in a Retiree’s Portfolio

Retirees often prioritize low-risk, income-producing assets, but avoiding growth investments entirely can be a big mistake. A portfolio focused solely on stability may not generate high enough returns to sustain your lifestyle, especially if you encounter a poor sequence of returns early in retirement or high inflation.

Without some exposure to growth, the risk of outliving your savings becomes very real. “Overly conservative portfolios early in retirement can struggle to keep up with inflation and reduce long-term financial flexibility,” said Melody Townsend, CFP, founder of Townsend Financial Planning. “The key is to balance appropriate risk with realistic income planning—not to eliminate growth altogether.”

With people living longer than ever, this balancing act has become increasingly delicate. While life expectancy dipped briefly during the COVID-19 pandemic, the broader trend has been upward for decades.

Fast Fact

According to the latest Social Security Administration (SSA) data, about 30% of U.S. men will live to age 85, and around 10% of women will reach age 95. Even at 70, many retirees need their savings to last 15 to 25 years.

How To Balance Growth and Income

One of the most popular and effective strategies for balancing growth and income in retirement is the bucket strategy. Recommended by Townsend and Charles Petitjean, CFP, it involves dividing your portfolio into “buckets” based on when you need the funds.

For example, according to Petitjean, you might separate your portfolio into the following three buckets:

• Short-term funds for the next two to three years
• Intermediate-term funds for the next four to eight years
• Long-term funds you don’t need for eight or more years

“The short-term bucket would be invested very conservatively, such as in a combination of cash, money market funds, and short-term bond funds,” Petitjean said. “The intermediate-term bucket might hold core bond funds with longer maturities and yield a higher annual return. Finally, the long-term bucket should be invested more aggressively, with investments such as U.S. and international stock funds.”

“This allows retirees to draw income without being forced to sell growth investments during down markets,” Townsend said. As a result, you can weather market volatility with greater confidence, knowing your near-term needs are protected even if long-term investments temporarily lose value.

Asset Allocation Funds

In addition to managing your asset allocation manually, you can use certain mutual funds and ETFs designed to help you achieve your desired mix more automatically. Some of the most popular examples include:

• Target-date funds: Designed around a specific retirement, these funds automatically adjust your investment mix over time. They typically start with a more aggressive allocation focused on growth stocks, then gradually become more conservative using bonds as the target date approaches.
• Balanced funds: These maintain a fixed ratio of stocks to bonds, aiming to offer a more permanent blend of growth potential and stable income. For example, a 60/40 split is common.
• Growth funds: Focused primarily on capital appreciation, these funds invest heavily in stocks with strong long-term growth potential. They also tend to reinvest earnings rather than paying out dividends. 
• Income funds: These funds are designed to generate steady cash flow through interest and dividend payments. They often include bonds, stable dividend-paying stocks, and other income-generating assets.

Tip

Target-date and balanced funds aim to balance growth potential and income stability within a single fund, but growth and income funds must be paired together to strike that balance.

While these asset allocation funds offer convenience, they may lack the precision necessary to adapt to your evolving needs. “They tend to be a good starting point for younger investors who are focused on accumulating for simplicity’s sake,” Petitjean said, “but they’re not personalized and can be somewhat of a black box.”

For retirees, that lack of customization can be a significant drawback. “Balanced/income funds might work for some, but I usually recommend customizing allocation based on the retiree’s full financial picture,” Townsend said. “Off-the-shelf funds have the potential to oversimplify what is usually a very personal decision.”

Rebalancing Your Portfolio

Because each asset class will grow at different and unpredictable rates, your portfolio will naturally drift from your target allocation. The process of realigning your investments with your ideal mix is called rebalancing. It involves selling off excess assets in one area and using the proceeds to bolster lagging positions in others.

For example, say your target allocation is 60% stocks and 40% bonds. After a strong year in the stock market, equities might grow to represent 70% of your portfolio. Rebalancing would involve selling stocks and buying bonds to bring your ratio back in line and achieve your desired mix of growth and income.

“Rebalancing is important for everyone, but it becomes even more important in retirement,” Petitjean said. “Not only does it help to keep the portfolio in line with its predefined target, but it also provides an opportunity to buy low and sell high.”

Risk Management Strategies

Beyond asset allocation, here are some other effective ways to protect your portfolio in retirement.

Diversification

Dividing your investments among stocks, bonds, and cash equivalents reduces your risk of suffering catastrophic losses, but true diversification takes this idea further. It involves building variety within each category, such as holding stocks across different sectors, industries, or regions.

When you hold individual investments that react differently to stimuli, you minimize your portfolio’s exposure to any one risk, helping to smooth out its performance. For example, if the tech sector takes a hit, having exposure to the health care sector may cushion the blow to the stock portion of your portfolio.

Proactive Tax Planning

You may not think of tax planning as a risk management strategy, but taxes represent one of the more significant threats to your retirement savings. “Some of the most overlooked forms of risk in retirement aren’t market-related; they’re tax-related,” Petitjean said.

Instead of waiting to meet with your accountant until it’s time to file a return, consult with them proactively throughout each year. Petitjean and Townsend emphasized the importance of a long-term strategy to minimize your lifetime tax liability.

“I am shocked by how many consumers only talk to their tax professional after the tax year has already closed,” Townsend said. “It is impossible to properly strategize by being reactive with taxes.”

Proactive tax planning allows you to execute more sophisticated and potentially lucrative strategies. “For example, I often encourage retirees in their 60s and early 70s to consider partial Roth conversions,” Petitjean said.

Roth conversions involve transferring funds from a pre-tax retirement account into a Roth IRA. You must pay taxes on the amount transferred in the year you execute the conversion, but you can then withdraw it tax-free from your Roth IRA in retirement.

Roth conversions can help you save by paying taxes on withdrawals while you’re in lower tax brackets. “These can be especially powerful in the years before forced income begins in the form of Social Security, pension income, and required minimum distributions (RMDs),” said Petitjean.

Automating Withdrawals

Emotional decision-making—especially panic selling during a downturn—can devastate your retirement savings. An investor who put $10,000 in the S&P 500 in 1995 would have $224,278 in 2024 if they stayed fully invested the whole time, but just $102,750—roughly 54% less—if they took their money out of the market during that period’s 10 best days.

One of the best ways to avoid this mistake is to set up a system that removes emotion from the equation by automating your portfolio withdrawals. “Most consumers love building the income stream to come in each month, like they are still getting a paycheck from their employer,” said Townsend.

Tip:

Many major brokerages offer automated solutions that can help. Schwab’s Intelligent Income feature allows you to create recurring monthly distributions from a Schwab Intelligent Portfolio. Similarly, the Fidelity Retirement Income Planner is an interactive tool for developing and automating a withdrawal strategy.

Working With a Professional

With so many moving parts in retirement, partnering with a qualified professional who understands the full financial picture can be one of the best ways to maximize your resources. Not only can they help you navigate complex situations, but they can also help make managing your money a more passive experience. That way, you can spend your golden years relaxing rather than working in a spreadsheet.

How Much Does the Average Retiree Have in Investments?

The average retiree’s investment balance varies by age. Americans aged 55 to 64 have an average of $537,560 in retirement accounts. Those between 65 and 75 average around $609,230. Individuals 75 or older average $462,410.

However, average doesn’t necessarily mean typical. The median retirement investment account balances for these age groups are $185,000 (ages 55 to 64), $200,000 (ages 65 to 75), and $130,000 (age 75 and higher).  

How Can Retirees Protect Their Portfolios From Inflation?

To protect your portfolio from inflation, you should maintain some exposure to growth-oriented investments, like stocks. Keeping your cash in high-yield savings accounts or low-risk money market funds can also help preserve purchasing power.

How Often Should Retirees Rebalance Their Portfolios?

There’s no universal rule, but experts often recommend rebalancing at least once a year, if not semi-annually or quarterly. The right frequency depends on your goals, risk tolerance, and market conditions.

The Bottom Line

Because your investment time horizon shrinks as you age, asset allocation becomes even more important in retirement. After 70, your focus often shifts from maximizing returns to generating reliable income, but growth investments remain vital. Some exposure is still necessary to stay ahead of inflation and maintain your lifestyle, especially with life expectancy increasing.

One of the best ways to balance growth and income is through the bucket strategy and regular rebalancing. Financial advisors can help you implement these and other risk management strategies, like advanced diversification, proactive tax planning, and automating withdrawals.