The Biggest Risk You're Taking With Your Retirement Nest Egg

Andy Dean Photography/Shutterstock Investors can afford to be aggressive when they're younger. But in their 50s or 60s? That aggressive manner should be mellowing down. Yet the vast majority of investors who are approaching retirement age are way too heavily invested in stocks. Investment company SigFig recently analyzed the asset allocation of more than 30,000 investors and compared that to their ideal allocation, based on their risk profile and investment horizon. The results: across all age groups, investment portfolios were too heavy on equities and too light on fixed income. Of baby boomers, only 3 percent of those in their 50s and 2 percent of those in their 60s had an allocation to fixed income investments that corresponded to their age risk tolerance, as determined by SigFig's questionnaire and an estimate of a well-balanced allocation. Bonds? What Bonds? A study released earlier this year by the Investment Company Institute, a mutual fund industry group, found that a third of investors in their 50s had 100 percent of their IRA accounts in stocks -- and so did a quarter of those age 60 to 64. For boomers easing into retirement, having 100 percent of their portfolio in equities probably doesn't feel too reassuring at times like the first half of this December, when the S&P 500 (^GPSC) fell more than 3.5 percent. More importantly, it's a risky strategy. You don't need to look back further than 2008-09 to know why.