Between longer lifespans and a seemingly never-ending bull market, you might be tempted to invest heavier in equities during retirement than the “110 minus your age” rule dictates. But new research from Dimensional Fund Advisors shows why retirees should be more conservative when it comes to too much equity exposure in their retirement funds. These findings may disabuse retirement savers of the benefits riskier investing offers. Swinging for the fences may be tempting, but a solid base-knock, without risk of a strikeout, may deliver a comparable result.
The Dimensional data, which is based on 100,000 simulations, found that an income-driven asset allocation comprised of just 25% equities offers similar retirement income as a wealth-focused portfolio weighted 50% in equities, but manages longevity risk more effectively.