My wife just retired and I will soon too – 90% of stock is in American companies, is this too risky?

24/7 Wall St. Key Takeaways:

• Once you start transitioning to early retirement, it’s time to make adjustments to your portfolio. 
• No matter your risk preference, the key is to create a plan that reflects your financial goals, risk tolerance, and income needs. 
• Also: Take this quiz to see if you’re on track to retire (Sponsored)

Once you have enough money for retirement, the focus shifts to managing your money. Balancing your investment portfolio is important to ensure that your saved money lasts through your retirement. 

Recently, a Reddit user had this same dilemma. They had recently adjusted their 69/28/3 Stock/Bond/Cash ratio as they and their spouse entered early retirement. Their allocation heavily favors U.S. equities (90%) over international (10%), with all holdings in low-cost ETFs. However, they’re now reconsidering their emphasis on domestic stocks and considering more stock exposure. 

Here’s my opinion on this question. Remember, this is just my opinion, not financial advice. 

1. Start with Your Target Allocation

A common benchmark for early retirees is the 60/30/10 Stock/Bond/Cash ratio, but this depends on your risk tolerance and expenses. You’ll need to adjust depending on your particular needs and risk tolerance. 

Generally, a higher bond allocation is considered safe, but you’ll want to increase your equity exposure to ensure enough interest collection. Bonds offer stability during the uncertain early years of retirement, but equities provide long-term growth to sustain wealth.

Don’t forget that all retirees need cash, too. A 3% cash allocation works for this couple due to other accessible investments and upcoming Social Security benefits (in 11–13 years). You may need something different!

2. Consider Global Exposure

I recommend using diversified international ETFs to achieve global exposure of around 20%–40% of your stock allocation. This provides a balance against the risk of investing entirely in one country’s economy. 

3. Adapt Over Time

That said, you should also plan to adapt over time. Early retirement is a great time to experiment with your allocation. You’ll probably want to start more conservatively with exact cash or bonds. However, you can reallocate towards equities as you gain confidence in your financial situation. 

Tools like bucket strategies can help separate short-term spending (cash and bonds) from long-term growth (stocks).

4. Plan for Social Security

This particular Redditor has over a decade before they’ll have Social Security available to them. It’s important to maintain a balance of growth and stability to bridge that gap without financial stress. Still, the Redditor can plan on Social Security in their future, and their saving strategy should reflect this. 

The amount you’re expecting to receive in Social Security should reflect your overall strategy, too. 

5. Engage in Regular Reviews

Your money will never be something you can “set and forget.” Therefore, you should plan on regularly reevaluating your portfolio’s performance and adjusting your allocations based on spending, marketing conditions, and evolving goals. 

You also need to regularly adjust your financial goals. Things change, and your financial goals may change with them!