About two years ago I rolled over about $100,000 of 401K money from a previous job into a conservative mutual fund. I am 50 year

Karen, first off, you should feel good about the decision you made.

When it comes to thinking about how to pay for retirement, you need to mentally place your money into two buckets.

In bucket No. 1 is the money you are going to spend. These are the funds that are going to replace the income you used to receive from your paycheck.

That money needs to be a) readily available and b) can’t be subjected to the vagaries of the stock market— you can’t have these funds suddenly dip 5% in value, when you were counting on them to pay the mortgage—so they need to be conservatively invested. How much this money earns is far less important than the fact that it is safe and immediately accessible.

The $100,000 you mentioned can certainly be used for that purpose. It represents about 20% of retirement funds, which is not by any means excessive.

The rest of your retirement money needs to be growing; you most likely will be retired for longer than you think, and you need your savings to grow at least as fast as the inflation rate.  

So, in bucket No. 2, you want to have your money primarily in stocks.

True, your diversified fund—like everyone else’s—has taken a beating recently.  But since you won’t need these funds for a while, there is time for them to recover and grow.

Long answer short: Your retirement asset allocation is fine. I would try to keep it the way that it is (80% stocks; 20% cash) for the next few years, and then gradually start increasing the funds in the money market accounts; you might want to add a bond fund as well. By the time you are 55, the allocation might be: 75% stocks; 15% cash; 10% bonds.  And by age 60, it could be 70% stocks; 30% bonds and cash.