The longest downturn in the 20th century was about 10 years – The Great Depression.
Therefore at 20 years out, I would keep the pedal to the floor…keep virtually all the money in the stock market and maximized 401K contributions.
At 10 years out, re-evaluate. How is their health? Do they plan to retire early? Does the job market look good in their chosen field(s)? Is the stock market way overvalued? If poor health, early retirement, employment problems are imminent, or an extreme stock crash looks likely then move to a more conservative position.
At 5 years out, I would start moving to a more conservative position. Most financial planners would recommend 60% stock 40% stable, Warren Buffett recommends 80-90% stock 10-20% stable. They should shoot for something in that range at 5 years out, depending on their risk tolerance.
The above is what I’ve been implementing in my own life.
