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Investing Specialists

The Bucket Investor's Guide to Setting Asset Allocation for Retirement

Use anticipated spending needs, probabilities of a positive return over your time horizon, to back into the right mix of cash, bonds, and stocks.

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Note: This article was originally published on Sept. 19, 2016.

Off-the-shelf asset allocation guidance doesn't vary significantly for people who are still accumulating assets for retirement. Sure, there are human capital considerations: A worker with a more volatile earnings trajectory, such as a commissioned salesperson, ought to have more safe assets than a tenured college professor. Similarly, the worker with a pension should be investing more aggressively than the investor who will rely exclusively on her own savings, plus Social Security, in retirement. Beyond variations like those, however, glide paths for accumulators should look pretty similar: stock-heavy at the outset and well into middle age, transitioning to more bonds and cash as retirement approaches.

Christine Benz does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.