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Question for the Money Doctors

Question submitted on Feb 18, 2011.

Question

I am a military retiree drawing a $36K pension. I am also working and saving into a 401K plan. Question: How do I figure an asset allocation plan? Is military pension figured as a fixed income portion (900K X .04% draw = 36K)? If I do that is it OK to keep my 401k 100% invested in stocks for my allocation?

Answer

Determining an asset allocation depends on many factors including but not limited to your invested and other assets, liabilities (debts and obligations), your age, current income, future income needs, tax bracket, risk tolerance and time horizon.  Not knowing your situation it is not possible to provide specific advice on developing an asset allocation for you.  Your military pension would not be figured as a fixed income portion of an asset allocation, however the pension would be considered retirement income, similar to social security and used as a factor in determining your overall allocation.

The factors I mention above are all important so I cannot provide a recommendation if a 100% equity allocation within your 401k is appropriate for your situation.  I recommend you work with a professional who is experienced developing asset allocations and financial advice in general to develop a customized approach to your overall situation.


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