Retirement Investing Doesn't Stop at 65 — Here's Why That Matters

Once you hit your mid-60s, investing is not about chasing risky returns. Instead, it’s about balancing growth and safety to ensure your money lasts a lifetime.

One way to do this is to keep investing. Even though your post-retirement investing may look different than the investing you did while you were still working, the purpose is the same: to watch your money grow and to protect your purchasing power.

There’s no one-size-fits-all formula for investing in retirement, but there are tools to help you determine which path best fits your goals and risk tolerance.

The 100-minus-age strategy

Your asset allocation will be specific to you, but generally it should gradually tilt toward safer investments, with a portion of your portfolio remaining in equities for growth. Financial advisors disagree on how much money you should try to “protect” and how much you should push toward growth, meaning it’s up to you to make the ultimate decision.

You might adopt a guideline suggesting that you subtract your current age from 100 — or 110 or 120, depending on the financial advisor you consult. For example, if you come from a family that tends to live long, you may decide to subtract your current age from 120. That means at age 65, you would hold 55% in stocks and 45% in bonds and cash.

While the 100-minus-age guideline may be a good starting point, it’s not your only option.

The bucket strategy

The core idea of the bucket strategy is to divide your retirement portfolio into “buckets” based on when you’re likely to need the funds. Imagine you divide your portfolio into three buckets. They might look like this:

Bucket 1: Near-term liquidity (one to three years of withdrawals)

In this bucket, you’ll keep enough cash, high-interest savings, and short-term deposits to cover one to three years of retirement account withdrawals. Having this bucket available reduces the risk that you’ll have to sell stocks at a discount to fund living expenses during market downturns.

Bucket 2: Medium-term stability (next three to seven years)

This bucket is meant to hold moderate-risk assets, such as diversified fixed income, quality bonds, and bond funds. An excellent example is the Vanguard Total Bond Market ETF (BND +0.07%), the largest U.S.-listed bond ETF by assets.

The goal of this bucket is to replenish Bucket 1 over time and smooth volatility while earning modest returns.

Bucket 3: Long-term growth (later in your retirement years)

This bucket will hold money you won’t need for many years, invested in growth assets such as U.S. and international equities, as well as other holdings with growth potential. Because Bucket 3 has a long horizon, it can better tolerate market swings in pursuit of better long-term returns.

Regardless of how much you invest or how you allocate assets, the goal is to generate and protect the money you’re counting on to fund the retirement you’ve spent years planning to enjoy.