This series of model portfolios from Morningstar’s director of personal finance and retirement planning Christine Benz can help investors reach their financial goals.
Morningstar’s Christine Benz put together a series of investment portfolio examples that both retirees and savers can refer to as they build their own portfolios.
The goal of these portfolios isn’t to generate the best returns of any retirement portfolio on record. They’re intended to help retirees and preretirees visualize what a long-term, strategic total return investment portfolio could look like. So, an investor could look to these portfolios for guidance on asset allocation without completely upending their favorite holdings.
From mutual fund portfolios to exchange-traded fund portfolios, from tax-efficient portfolios to simple portfolios for the minimalist investor, this series of portfolios has something for everyone. More than anything, these portfolios serve as examples of how investors can construct portfolios that match their own financial goals.
Hey there! So you’ve reached the big 7-0 (or you’re planning ahead), and you’re wondering what your investment portfolio should look like now It’s a super important question because at 70, you’re in a unique spot – you need income to live on, but you also might have 15-25 more years ahead, meaning growth is still important!
I’ve spent weeks researching this topic, and the truth surprised me: many retirees get this wrong by becoming TOO conservative. Let’s fix that together!
The Big Challenge: Balance at Age 70
When I turned 70 last year (just kidding, I’m not there yet!), I realized the old rules about retirement investing were outdated. Here’s what makes age 70 special:
- You’re officially taking RMDs (Required Minimum Distributions) if you have traditional retirement accounts
- You’re likely receiving Social Security and maybe pension income
- You still need growth to keep up with inflation for potentially 20+ more years
- You need stability for near-term expenses
The traditional advice used to be “subtract your age from 100” to determine your stock percentage. But with longer lifespans, many experts now recommend more aggressive formulas like “110 minus your age” or even “125 minus your age”!
My Recommended Portfolio Breakdown at 70
Look, every situation is different based on your savings, spending needs, and risk tolerance But here’s a solid starting point for a 70-year-old’s portfolio
| Asset Type | Percentage | Purpose |
|---|---|---|
| Cash & Cash Equivalents | 5-10% | Immediate needs |
| Short-term bonds | 15-20% | 1-3 year expenses |
| Intermediate bonds | 25-30% | Income & stability |
| Stocks (dividend focus) | 25-30% | Growth & income |
| Growth stocks | 10-15% | Long-term growth |
| Alternative investments | 0-5% | Diversification |
This gives you roughly a 40-45% allocation to stocks and 55-60% to bonds and cash – more growth-oriented than many 70-year-olds typically hold!
The Three-Bucket Strategy I Love
One of my favorite approaches for retirees is the “bucket strategy” which divides your portfolio based on when you’ll need the money
Bucket 1: Short-Term Money (2-3 years of expenses)
- Cash
- Money market funds
- Short-term bond funds
- Purpose: Covers your immediate living expenses
Bucket 2: Intermediate Money (4-8 years)
- Core bond funds
- Higher-yield bond funds
- Dividend-paying stocks
- Purpose: Refills Bucket 1 and provides income
Bucket 3: Long-Term Money (8+ years)
- Growth-oriented stocks
- U.S. and international stock funds
- Purpose: Provides growth to outpace inflation
What I love about this approach is it helps you psychologically handle market downturns. You can sleep at night knowing you have several years of expenses covered while letting your long-term investments ride out volatility.
Why Growth Is Crucial After 70 (Don’t Make This Mistake!)
Here’s a common mistake I see: going too conservative too soon. With life expectancies rising, many 70-year-olds will live into their 90s. That’s potentially 20+ years your money needs to last!
Two major risks if you avoid growth investments:
- Inflation Risk: Even modest 3% inflation cuts your purchasing power in half over 24 years
- Longevity Risk: The risk of outliving your money
As financial planner Melody Townsend puts it, “Overly conservative portfolios early in retirement can struggle to keep up with inflation and reduce long-term financial flexibility.”
My Safety Net Recommendation
To protect yourself while maintaining growth, I recommend creating these safety nets:
- Keep 1 year of expenses in cash (beyond regular income from Social Security/pensions)
- Hold 2-4 years of expenses in short-term bonds or CDs
Why 2-4 years in short-term bonds? Because historically, the average recovery time for stocks during bear markets has been about 3.5 years. This gives you a cushion so you don’t have to sell stocks during a downturn.
Income-Generating Strategies for Your 70s
At 70, generating reliable income becomes super important. Here are some strategies that work well:
Bond Ladder Strategy
Purchase bonds with staggered maturity dates (like 1-year, 2-year, 3-year bonds). As each matures, you can either use the cash or reinvest depending on your needs and current interest rates.
Dividend Stock Strategy
Focus on quality companies with histories of steady dividend payments and increases. These provide regular income while maintaining growth potential.
Strategic Withdrawal Plan
Rather than just taking income from one source, develop a tax-efficient withdrawal strategy that minimizes your tax burden.
How to Rebalance Your Portfolio (Don’t Skip This!)
As you get older, your portfolio will naturally drift from your target allocation. Regular rebalancing is critical! Here’s my simple approach:
- Check your portfolio at least once annually
- If any asset class has drifted more than 5% from your target, rebalance
- Consider tax implications when rebalancing (preferably do it in tax-advantaged accounts)
For example, if your target is 40% stocks but growth pushes it to 46%, you’d sell some stocks and buy bonds to bring it back in line.
Special Considerations for Ages 70-80
As you move through your 70s, your allocation should gradually become more conservative. Using Schwab’s general guidelines:
- Age 70-79: Consider a moderately conservative portfolio (40% stocks, 50% bonds, 10% cash)
- Age 80+: Consider a conservative portfolio (20% stocks, 50% bonds, 30% cash)
But remember – these are just guidelines! Your personal situation may warrant a different approach.
Risk Management Strategies Beyond Asset Allocation
There’s more to managing risk than just your stock/bond mix. Here are some additional strategies I recommend:
Diversification Within Asset Classes
Don’t just diversify between stocks and bonds – diversify within them! Hold different sectors, industries, and geographic regions in your stock portfolio.
Tax Planning
Work with a tax professional to minimize your lifetime tax liability. Consider strategies like partial Roth conversions in lower-income years.
Automate Your Withdrawals
Set up automatic withdrawals from your portfolio to create a “retirement paycheck.” This removes emotion from the equation and prevents panic selling during market downturns.
Common Questions About Portfolios at Age 70
How much should the average 70-year-old have saved?
According to data, Americans aged 65-75 have an average of about $609,230 in retirement accounts. However, the median is much lower at around $200,000, indicating some very large accounts skew the average.
Should I eliminate all growth investments at age 70?
Absolutely not! With potentially 15-25 years of retirement ahead, maintaining some growth exposure is essential to combat inflation and longevity risk.
How often should I rebalance my portfolio after 70?
At least annually, but some experts recommend semi-annual or quarterly reviews, especially during volatile markets.
Final Thoughts: Your Age-70 Portfolio Game Plan
Here’s my 3-step game plan for optimizing your portfolio at age 70:
-
Assess your income sources – How much comes from guaranteed sources like Social Security and pensions? The more guaranteed income you have, the more aggressive you can be with your portfolio.
-
Build your safety nets – Establish your 1-year cash reserve and 2-4 year short-term bond/CD reserve before allocating the rest of your portfolio.
-
Strike the right balance – Aim for roughly 40% in stocks at age 70, gradually reducing as you age, but never eliminating growth entirely.
Remember, your portfolio at 70 isn’t about maximizing returns anymore – it’s about creating reliable income while maintaining enough growth to make your money last as long as you do.
Have you made adjustments to your portfolio recently? I’d love to hear your thoughts in the comments below!
An Introduction to Christine Benz’s Model Portfolios You can use these models to see reasonable asset allocations that align with various goals.
The Bucket structure calls for adding assets back to Bucket 1 as the cash is spent down. Yet investors can exercise a lot of leeway to determine the logistics of that necessary Bucket portfolio management.
How To Build a Retirement Portfolio Using the Bucket Approach
The Bucket approach to investment portfolio construction is anchored on the basic premise that assets retirees need to pay for living expenses now ought to remain in cash despite its low yields. Assets that won’t be needed for several years can be parked in a diversified pool of long-term holdings, with the cash buffer providing the peace of mind to ride out periodic downturns in the long-term portfolio.
Most of the model portfolios laid out in the sections below include three Buckets geared toward the near, intermediate, and long term. Investors should use their own portfolio spending, financial goals, risk tolerance, and risk capacity to determine how much they hold in each bucket.