Proportion of cash and bonds in 401k
Thank you, for your information it is very helpful!
I’m retired drawing from my 401k, i have 20% in money market and 30% in bonds, the other 50% is divided among small, midcap and large company funds. . This has worked well these last few years, is this still an appropriate distribution for my portfolio?
Terry Says
That’s the trillion dollar question. Your time horizon has shortened because now you are in the withdrawal stage. It’s tough to answer, not knowing what other assets you have and how much you need to withdraw each year. (I’m assuming you are not at the RMD state of over age 73.) And I don’t know your “risk tolerance” — ie how panicked you’ll be in a market decline.
But both stocks and bonds can decline in value. Bond prices drop when interest rates rise. (Read this explainer from a few years ago: https://www.terrysavage.com/beware-of-bonds-3/)
If you have to sell bonds to get money to live on, you could take a loss — just like with stocks. That happened in 2022, when both stocks and bonds lost double-digits!
This would be a great time to see a fee-only FIDUCIARY advisor. Even if just for a once-a-year meeting.
Find one you can trust here: https://www.terrysavage.com/pam-krueger-wealthramp/
So back to your original question, which I can’t answer based on facts. But the very fact that you are asking makes me think you’re a bit uncomfortable with your current exposure. Maybe moving to 35% in MM funds would help you sleep better at night?
