I’m 53 years old and have $1,100,000 in my Roth 401(k) and traditional 401(k). I have another $500,000 in various funds and stocks. Currently, 92 percent of my portfolio is invested in stocks and 8 percent is invested in bonds, and about 85 percent of that is invested in index funds.
Am I safe to continue investing in Warren Buffet’s 90 percent stock, 10 percent bond recommendation, or should I play it safe and become more conservative as I near retirement?
At 53 you are still a long-term investor, especially when you take into account the additional 20-25 years for which you should continue to plan after you retire. Therefore, your risk exposure should not simply depend on your age, as I think you are already aware by asking the question. Your capacity, tolerance, and need for risk also depend on other factors as well.
Although investors in their 50s on average have more conservative asset allocations than 90% stocks/10% bonds, you seem to be more sophisticated about investing than the average investor (you invest in index funds, you have a Roth and traditional 401k, and you have additional investment accounts). By understanding key principles about investing and how the markets work, you may be more comfortable with risk than someone who isn’t as sophisticated. Therefore, your tolerance for risk may be higher, which may mean that perhaps your current allocation is appropriate.
However, it’s very difficult to answer these types of questions without more information, and I’m sure you understand that. You’re always better off discussing your specific scenario with a fee only fiduciary investment advisor. Until then, be comfortable about what you are doing. It’s gotten you this far already. Good luck.