Asset allocation models

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How do you know which investments to include in your retirement plan? Your selections will help determine the health of your finances in retirement.

Ideally, your mix of investments would grow enough to support you in retirement while buffering you from the ups and downs of market fluctuations. But how do you find the right combination of investments?

Your financial professional can work with you to create a customized savings plan. Together, you should assess your overall situation, including your other assets, specific financial needs and risk tolerance.

You can also use the American Funds asset allocation models as a guide when choosing your investments. This collection of sample portfolios was designed for investors based on their retirement time frames. The fund categories shown — growth, growth-and-income, equity-income/balanced and bond — are commonly found in retirement plans. Find the model designed for your time frame below.

Click on any model for more details and to see how the portfolios compare.
Asset allocation models
Retirement time frame
20 years or more to retirement Model A
allocation model
growth color
Growth 40%
growth-and-income color
Growth-and-
income
35%
balanced color
Equity-income/
Balanced
20%
bond color
Bond 5%
5–20 years to retirement Model B
allocation model
growth color
Growth 20%
growth-and-income color
Growth-and-
income
35%
balanced color
Equity-income/
Balanced
20%
bond color
Bond 25%
5 years or less to retirement Model C
allocation model
growth color
Growth 15%
growth-and-income color
Growth-and-
income
30%
balanced color
Equity-income/
Balanced
20%
bond color
Bond 35%
First 10 years of retirement Model D
allocation model
growth color
Growth 0%
growth-and-income color
Growth-and-
income
20%
balanced color
Equity-income/
Balanced
30%
bond color
Bond 50%

Fund categories

Growth funds provide the highest potential risk and reward, followed in order by growth-and-income, equity-income, balanced and bond funds. Your company’s retirement plan may not offer funds in every investment category. See Choose the right mutual funds for more details about fund categories.

Models balance risk and return based on time until retirement

It makes sense for younger investors to invest with the goal of achieving higher returns so that their retirement savings grow and stay ahead of the rate of inflation. As retirement approaches, older investors tend to move into investments with less risk to protect the money they’ve saved.

That’s how our asset allocation models were designed. Model A puts heavy emphasis on growth for younger investors. Models B, C and D each focus more on income and stability than the preceding model.

If you find yourself more than 10 years into retirement and more dependent on your savings, you may want to consider investing mainly in funds that aim to preserve what you’ve saved.

Reassess your investment mix regularly

Because your needs, goals, portfolio and situation may change over time, be sure to re-evaluate your investment strategy at least once a year. You can always choose a different model or create your own mix.

Models are not investment advice

Remember that the models are intended only as a general guide. Your financial professional can help you decide if the models make sense for you. Whether you use the models or not, you’ll need to decide which specific funds to invest in. Use the list (above right) to see how American Funds categorizes its funds.

Further reading

If you want to learn more about selecting an investment mix, explore our Develop an investment strategy section. You’ll find a series of articles that explain asset classes and mutual fund types, different kinds of risk, how time should influence your investment choices, and much more.

Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value.

Investors should carefully consider investment objectives, risks, charges and expenses. This and other important information is contained in the fund prospectuses and summary prospectuses, which can be obtained from your plan’s financial professional or downloaded and should be read carefully before investing.

Investment allocations may not achieve fund objectives. There are expenses associated with the underlying funds in addition to fund of funds expenses. The funds’ risks are directly related to the risks of the underlying funds as described below.

Investing outside the United States involves risks such as currency fluctuations, periods of illiquidity and price volatility, as more fully described in the prospectus. These risks may be heightened in connection with investments in developing countries. Small-company stocks entail additional risks, and they can fluctuate in price more than larger company stocks.

The return of principal for bond funds and for funds with significant underlying bond holdings is not guaranteed. Fund shares are subject to the same interest rate, inflation and credit risks associated with the underlying bond holdings. Lower rated bonds are subject to greater fluctuations in value and risk of loss of income and principal than higher rated bonds.

Income from municipal bonds may be subject to state or local income taxes and/or the federal alternative minimum tax. Certain other income, as well as capital gain distributions, may be taxable. Fund shares of the U.S. Government Securities Fund are not guaranteed by the U.S. government.