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Rethinking the Shift-to-Bonds Strategy

Low rates and longevity alter rules for retirees
relates to Rethinking the Shift-to-Bonds Strategy
Photographer: Walter Sanders/Time Life Pictures/Getty Images

Investment adviser Brett Danko has a warning for a New Jersey couple in their early 50s who’ve sought his help about how to plan for retirement: Either allocate more savings to stocks than fixed income, or risk having to scrimp in old age.

The couple, ages 51 and 53, have about 80 percent of their $1 million retirement savings stashed in government bonds yielding just 1 percent to 2 percent; the rest is in stocks. They’ll need to double their nest egg if they want to retire at 67 and have the $80,000 a year they’re hoping to draw from their investments, says Danko, an adviser at Main Street Financial Solutions in Pennington, N.J. “Their risk tolerance is very low, and I don’t want them staring at the ceiling at night and worrying,” he says. “But if they don’t change how they’re allocating savings, they’ll be worrying in their 80s, when they may start running out of money.”