Personal Finance

I'm in my 50s with $5 million and a $65k pension - how should I shift my portfolio to bonds so I'm taking less risk?

Maurie Backman

Published: March 6, 2025 11:43 am

Once you’re on the cusp of retirement, it’s important to assess your investment portfolio and make changes as necessary. And one thing it generally pays to do is reduce your exposure to the stock market.

Stocks can be a very volatile asset. It’s one thing to go heavy on them when you’re in the process of building wealth for retirement. But it’s another thing to have most of your portfolio in stocks when you’re about to retire and start living off of your savings.

That’s the situation this Reddit poster is in. The poster is in their mid-50s with a $5.2 million net worth plus a $65,000 annual pension. They’re aiming to retire in the next year, which is totally doable given their financial situation.

They’re looking to reduce the risk in their portfolio by moving over to bonds. But while that’s a smart idea, they shouldn’t take it to an extreme.

It’s not a good idea to dump stocks completely in retirement

Bonds are generally a far more stable asset than stocks. For this reason, they’re commonly regarded as a suitable asset to hold in retirement. Not only do bond values fluctuate less wildly than stock values, but bonds are a great income producer.

Now the poster here is looking to get down to a 60/40 allocation as soon as possible. This is a very reasonable allocation for someone in their situation.

It’s not a good idea to get rid of stocks completely in retirement. If you dump your stocks, your portfolio may not generate enough growth to allow for the withdrawal rate you want. But that’s clearly not what the poster is planning to do at all.

Reducing risk ahead of retirement

The poster here is smart to reduce their risk knowing that they’ll be dipping into their portfolio for retirement income. They may not need to do so to such an extreme since they have a $65,000 pension. But depending on their income, they may need to supplement that $65,000.

The poster should aim to reduce risk by dumping some stock positions and replacing them with bonds. They can choose from a mix of Treasurys, corporate bonds for higher yields, and municipal bonds for the tax benefits. The type of bonds they choose should hinge at least partially on their tax bracket.

At $65,000 a year plus a small amount of portfolio income, their tax bracket may not be so high. But if they’ll be taking larger withdrawals, that changes things.

Also, we don’t know what tax brackets will look like in the future. That’s something the poster should keep in mind if they’re going to buy longer-term bonds.

The poster can also reduce their risk on the stock side by diversifying to dividend or broad market ETFs. This doesn’t mean they can’t hold any individual stocks, but they should choose those carefully.

Another smart thing for the poster to do? Sit down with a financial advisor and see what they have to say.

A financial advisor can give the poster’s portfolio a close look and make recommendations. They can also see how much income the poster hopes to get out of their portfolio each year, as that should be a factor in deciding how it’s invested.