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It almost goes without saying that planning for retirement — particularly when it comes to your finances — is a vital step in securing a comfortable future for yourself and your family. That part of the equation is common knowledge. But it can still leave you with plenty of questions about what strategies you'll use to actually get to that point. That's where retirement portfolio allocation comes in.

Retirement portfolio allocation refers to deciding how much money to put into each of the different investments that make up the bulk of your retirement savings. Think of it as creating a plan that outlines different financial products you should invest in, when you should invest in them and how long you'll continue investing in them. Understanding a few key steps in this process can make your retirement portfolio allocation planning easier to navigate at any age.

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Before you can plan for your future, it's important to understand your starting point in the here and now. Begin by figuring out how much you already have set aside for retirement — and rest assured that if you're not quite where you'd like to be, you can still take key steps to get there.

A 2020 report from the Federal Reserve revealed that nearly a quarter of Americans have no savings set aside for retirement and that only 51% of those over the age of 60 say their retirement savings are on track. But no matter what point you're at in your journey, the important thing is to start moving forward instead of looking back.

If you do have some funds set aside for retirement, begin by taking stock of how much you've already accumulated in the form of:

IRAs
Social Security
Your 401(k) or 403(b)
Stocks, bonds or other investment assets
Savings accounts earmarked for retirement

Check the Social Security Administration website's retirement benefit estimator to see how much income you can currently expect to draw during your retirement years.

Step 2: Identify Your Goals

What kind of life would you ideally like to lead after retiring? Do you plan to simply downsize your home and enjoy a simple life in your golden years? Or do your goals involve upscaling, traveling and living a little more extravagantly? Do you plan to work until you're 70, or do you want to make a goal of retiring as early as 45?

Simply understanding what your dreams are can go a long way towards helping you pinpoint how financially prepared you need to be before considering retirement. Also, take your health and life expectancy into account. The average retiree should aim to set aside assets that can help them live comfortably for at least three decades or more.

Taking into account how long your retirement will last and how much you'd like your early income to be can go a long way towards helping you understand how much money to set aside. Leave a little room for fluctuations in your estimates; you want to retire without running out of money, of course, but you may also find that you don't need to save as aggressively as you might anticipate.

Step 3: Understand How to Approach Your Portfolio

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At this point, you should have a good idea of where your retirement savings are as opposed to where you'd like them to be. If you find yourself much further behind than you'd expected, it's wise to talk to a financial advisor or retirement planner.

Financial advisors usually charge a small yearly percentage of your holdings as a fee, often around 1%. If you're not as up-to-date on investing as you'd like to be, working with a professional is a great way to get started without making potentially costly mistakes.

If, on the other hand, you'd like to be more involved in managing all or part of your assets, then the important thing is to make sure you understand various investment options. The goal of most retirement portfolios is to find a good balance between risk and return. Some investments, such as treasury bonds, are nearly risk-free but bring in smaller returns, while others, such as stocks, have the potential to bring in higher returns but with higher risk.

Step 4: Study Your Investment Options

The basic retirement portfolio contains a mixture of stocks, bonds and cash investments. It's important to understand each as well as their risk-return ratios to decide how much money to allocate to each category. Below is a very basic overview of each.

Bonds

Bonds are basically loans on which the borrower — often the U.S. government, in the case of Treasury Bonds — agrees to pay you interest for a set amount of time before returning the amount of the loan to you. While they don't tend to produce high returns, bonds can be great sources of guaranteed income if you structure them correctly.

Cash Investments

Cash investments involve investing in things like certificates of deposit (CDs) and money market funds. CDs allow you to invest money for a fixed amount of time at a fixed interest rate, while money market funds are kind of like high-liquidity, short-term mutual funds.

Stocks

Stocks are shares of a company, the value of which fluctuates over time. If you aren't very familiar with different types of stocks (dividend, growth, momentum and others) then it's highly advisable to either enlist the help of a professional or do your due diligence to learn about the market before investing. While stocks tend to present a higher risk, they can also generate great returns if you play your cards right.

Additional types of investments to look into include:

Exchange-traded funds
Real estate investment trusts
Savings accounts (preferably high-yield)

Step 5: Plan Your Retirement Portfolio Allocation

The percentage of the money you should put towards each type of investment generally depends on how far away from retirement you are. One older rule of thumb advises subtracting your age from the number 100 and using the difference to determine what percentage of your portfolio should consist of stocks. This rule exists because for the most part, the older you are, the less time you'll have to recover from poor stock market performance.

For instance, if you're 45 years old, then your portfolio should be made up of 55% stocks. If you're 60, the stock percentage drops to 40%. Because many Americans are starting to live longer, however, this rule is now commonly being amended to subtracting your age from 110 or even 120 instead.

Financial services company Charles Schwab also recommends having at least one year's worth of retirement expenses set aside in cash. This allows you to maintain some liquidity with your funds and can help you weather any downturns in the market that may affect other investments you're planning on drawing from in the short term during retirement. The older you grow, the larger the percentage of your portfolio allocated towards cash and cash investments like CDs should become.