Typical Retirement Portfolios

Some interesting information from Charles Schwab On Investing. Here is how a variety of typical retirement portfolios would have worked over the last 45 years. I don’t see an author listed for this article, but he recommends that you not retire shortly before a market crash. This could be hazardous to your financial well being. Go figure. He also provided me with a new term, sequence-of-returns risk. This refers to permanently damaging your retirement portfolio by withdrawing too much when the market is crashing, another bad idea.

Now I will let you meditate on subjects that will affect your choice of a portfolio such as age, cognitive capacity (think dementia), fear, greed, current income requirements, projected future needs, and the ability not to need the market for extended periods of time. If you can live on dividends, interest income, and a cash cushion for a period of several years, you can ride out most economic storms.

Moderate
35% Fixed Income
5% Cash Investments
60% Stocks

35% U.S. Large Cap

10% U.S. Small Cap

15% International

Performance: 1970-2015
Average Annual Return: 9.5%
Best Year: 30.9% Worst Year: -20.9%

Moderately Conservative
50% Fixed Income
10% Cash Investments
40% Stocks

25% U.S. Large Cap

5% U.S. Small Cap

10% International

Performance: 1970-2015
Average Annual Return: 8.8%
Best Year: 27.0% Worst Year: -12.5%

Conservative
50% Fixed Income
30% Cash Investments
20% Stocks

15% U.S. Large Cap

5% International

Performance: 1970-2015
Average Annual Return: 7.7%
Best Year: 22.0% Worst Year: -4.6%