I’ve read that for 401k’s, you want to reduce risk as you get older and the primary means to do that is to move money out of stocks and into bonds.

Assuming that principle is generally valid, then for someone that’s not close to retirement (over 10 years away), would I want 401k investments in a long term bond fund.


If you are more than 10 years away from retirement/needing the money, you want them in Growth funds or Value funds, depending on your nerves. The long term average is there ~10% (7% after inflation).

Bonds at this stage are too conservative, and you would miss out on probably doubling your money in those 10 years.

However, your personal risk acceptance level is relevant. Some people can’t sleep with their money doing roller coaster rides, and then you need to be more conservative / risk-averse.

  • 1
    Another reason to keep most of you retirement fund in stocks is that you do not withdraw it all the day you retire ; some of the savings will be in there for ( on average ) more than 25 years. I am 80 and 80% in stocks, although days like this ( Dow down 600 + points ) are unsettling. Feb 2 '18 at 20:40
  • 1
    May you enjoy the fruits of that strategy at age 105, @blacksmith37 :)
    – Beanluc
    Feb 2 '18 at 23:30
  • I meant 25 yr from the date of retirement; eg. Retire at 60 and withdraw money until 85. Feb 3 '18 at 15:50

A more accurate statement would be "you want to reduce risk when you become dependent on the income of the investment". The danger of a more risky portfolio is that if there is a market correction, you might not have time to recover before you become dependent of the income.

If you plan to retire in the next 10 years, then it might be beneficial to reduce your risk somewhat, and bonds are certainly less risky that equities. As you get closer, you can gradually move some investment to less risky instruments to protect as much as you need to depend on.

If you are more than 10 years away from retirement, the danger of moving to a less risky portfolio is that you miss out on the market gains, which heavily outweigh the losses in the long run.

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.