When it comes to investing for retirement, one of the most common questions people ask is: Should I put my money in stocks or bonds? The answer, according to Registered Financial Planner Christopher Cervantes, isn’t one or the other—it’s both. But the mix depends heavily on your age, goals, and how close you are to retirement.
“Early in your career, it makes sense to take more risk,” Cervantes tells Financial Adviser PH. “But as you approach retirement, the priority shifts from growth to protection.”
The Case for Stocks—While You’re Young
Stocks are known for higher long-term returns, which is why they’re often recommended for younger investors. With decades ahead before retirement, you have more time to recover from market downturns.
“If you’re 30 years away from retirement, volatility isn’t your enemy—it’s part of the game,” says Cervantes. “That’s when you want growth.”
During this phase, a portfolio with a higher allocation to equities (e.g. 70–80%) allows your investments to compound aggressively, helping build a sizable retirement fund.
The Shift Toward Stability—Why Bonds Matter Later
As you get closer to your target retirement age, the game plan should evolve. That’s when preserving capital becomes more important than chasing returns.
“Ten years before retirement is a good time to start rebalancing,” Cervantes explains. “Gradually reduce your stock exposure and increase your bond holdings.”
Bonds provide predictable income and carry lower risk, making them ideal for retirees who will soon need to draw from their investments.
A common approach is the age-based allocation rule: subtract your age from 100 to find your ideal stock percentage. For example, if you’re 60, you might keep 40% in stocks and 60% in bonds or other fixed-income assets.
Keep It Balanced, Stay Flexible
Cervantes also recommends rebalancing your portfolio annually and considering hybrid solutions like retirement mutual funds that automatically adjust your stock-bond mix based on your age.
Bottom line:
You don’t have to guess between stocks or bonds—you need both, just in the right proportions at the right time. By gradually shifting your strategy as you near retirement, you can build a portfolio that balances growth with peace of mind.
