A Sample Retirement Portfolio for Moderate Investors

For investors with 20-year time horizons, this portfolio includes a good mix of shorter- and longer-term holdings

Christine Benz 8 November, 2012 | 9:51AM
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My previous "bucket" portfolio that I outlined in an earlier article is probably a far cry from your grandparents' retirement portfolio. Developed for a hypothetical retired couple with a 25-year time horizon, the portfolio acknowledges that increasing longevity rates mean that most retirees will need a healthy equity stake for growth potential. And in a bow to today's low-yield environment, the portfolio relies on a total-return approach rather than maintaining an income-only strategy.

But not every retiree has a 25-year time horizon and the high risk tolerance that would make such a portfolio a good fit. So this time around, I'll show how the bucket concept can be adjusted to suit a couple with a slightly shorter time horizon--20 years--and a somewhat lower capacity to withstand the sometimes-extreme return fluctuations that accompany stocks.

Bucketing Basics

Bucket retirement portfolios are appealing on a couple of levels. By staging the portfolio by time horizon--which is the key point about bucketing--you can afford to ride out the volatility inherent in stocks and more aggressive bond types because you know you won't need to touch that money for several more years. My construct includes a safe, liquid bucket for near-term income needs; an intermediate-term bucket that will eventually cover expenses during the middle retirement years; and a long-term bucket consisting mainly of stocks for the later retirement years. Assets are periodically moved from buckets 2 and 3 into bucket 1 to help meet income needs.

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The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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About Author

Christine Benz

Christine Benz  is director of personal finance at Morningstar and author of 30-Minute Money Solutions: A Step-by-Step Guide to Managing Your Finances.