It's important to keep your money invested not just in the years leading up to retirement, but also in retirement. If you enter retirement with a $500,000 IRA or 401(k), you'll want that balance to keep growing even as you're taking withdrawals. That will give you more financial freedom as a retiree.
Now, you may have heard that stocks can be a risky investment for older people because their value can fluctuate on a whim, whereas more conservative assets like bonds tend to be more stable. The reason it's okay for younger people to have most of their assets in stocks is that they have time to ride out market downturns. But if you're in retirement and are already tapping your portfolio to cover living costs, you may not have that same flexibility.
As such, it's a good idea to limit your stock holdings once you get older. But there's definitely no such thing as being too old to own stocks.
It's all about striking the right balance
The reason you want to keep some stocks in your portfolio when you're older, whether it's your IRA or a regular brokerage account, is that they commonly generate higher returns than safer assets, like bonds. And you want those higher returns to keep helping you grow wealth.
That's why dumping your stocks completely in retirement is not the best move. But you also don't want to go too heavy on stocks, either, because you want to limit your risk.
So how do you strike the right balance? One rule you can use is to take the number 110 and subtract your age. That could represent the percentage of your portfolio that you should keep in stocks. So if you're 75 years old, you'd subtract 75 from 110 to arrive at 35% of your holdings in stocks.
You can also follow this advice from Schwab:
- At age 60 to 69, consider a moderate portfolio that's 60% invested in stocks.
- At age 70 to 79, consider a moderately conservative portfolio with 40% in stocks.
- At age 80 and above, be conservative and limit your stock holdings to 20%.
Or, you could simply develop your own strategy based on your personal risk tolerance, income needs, and other factors. If the idea of having more than 15% of your portfolio in stocks, for example, keeps you awake at night, then limit yourself to that percentage. Your comfort level is something that should absolutely be accounted for.
You're not too old to grow your money
Keeping stocks in your portfolio is a great way to generate ongoing retirement income, which you'll need to live comfortably and meet your goals. If you're not comfortable holding a lot of stocks in retirement, go light on them. But think twice before you decide to dump your stocks completely.
If you stick with investments that are too safe, you might have to limit your spending or make other sacrifices. On the flipside, taking on a modest amount of risk might give you a lot more financial flexibility.
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FAQs
Many individuals have apprehensions about investing later in life. But there is no such thing as being too old to get started.
Should a 70 year old be in the stock market? ›
If you're 70, you'd look at sticking to 40% stocks. Of course, there's wiggle room with this formula, and it's really just a way to get started. And for many older investors, a 50-50 split of stocks and bonds is what's preferred throughout retirement, and that's fine, too.
Should an 80 year old invest in stocks? ›
At age 60–69, consider a moderate portfolio (60% stock, 35% bonds, 5% cash/cash investments); 70–79, moderately conservative (40% stock, 50% bonds, 10% cash/cash investments); 80 and above, conservative (20% stock, 50% bonds, 30% cash/cash investments).
At what age should you get out of the stock market? ›
There are no set ages to get into or to get out of the stock market. While older clients may want to reduce their investing risk as they age, this doesn't necessarily mean they should be totally out of the stock market.
Should seniors get out of the stock market? ›
Market volatility can be scary, but keep in mind that, historically, stock markets have recovered from dips and gone on to see better returns in the long run. Instead of getting out of the stock market, most retirees use a “buy and hold” strategy to maximize long-term gains exactly for this reason.
What is a good portfolio for a 75 year old? ›
But now that Americans are living longer, that formula has changed to 110 or 120 minus your age — meaning that if you're 75, you should have 35% to 45% of your portfolio in stocks. Using this formula, if your portfolio totals $100,000, then you should have no less than $35,000 in stocks and no more than $45,000.
How much should a 72 year old have in stocks? ›
For example, if you're 30, you should keep 70% of your portfolio in stocks. If you're 70, you should keep 30% of your portfolio in stocks. However, with Americans living longer and longer, many financial planners are now recommending that the rule should be closer to 110 or 120 minus your age.
How much cash should an 80 year old have? ›
With those time ranges in mind, it may be reasonable to hold cash to cover one to two years of living expenses (beyond predictable Social Security and pension income) in addition to your daily use account. The exact amount you want to have also depends on your risk tolerance and the amount you have saved.
At what age do you stop investing? ›
As there's no magic age that dictates when it's time to switch from saver to spender (some people can retire at 40, while most have to wait until their 60s or even 70+), you have to consider your own financial situation and lifestyle.
How much money do I need to invest to make $3,000 a month? ›
Imagine you wish to amass $3000 monthly from your investments, amounting to $36,000 annually. If you park your funds in a savings account offering a 2% annual interest rate, you'd need to inject roughly $1.8 million into the account.
A stock portfolio focused on dividends can generate $1,000 per month or more in perpetual passive income, Mircea Iosif wrote on Medium. “For example, at a 4% dividend yield, you would need a portfolio worth $300,000.
Where does the money go when the stock market crashes? ›
If you have a certain amount in your investment account and that balance drops during a market crash, what happens to that money? It doesn't actually go anywhere, as confusing as it may seem. While it appears that you're losing money during a market crash, in reality, it's just your stocks losing value.
How much money does the average person have in the stock market? ›
The average amount of money people invest in stocks varies greatly depending on individual financial situations and goals . According to a survey by Bankrate , the average amount invested in stocks by Americans is around $ 8,000 .
How much should a retired person have in stocks? ›
The 100-minus-your-age long-term savings rule is designed to guard against investment risk in retirement. If you're 60, you should only have 40% of your retirement portfolio in stocks, with the rest in bonds, money market accounts and cash.
When should you stop investing in stocks? ›
When, or if, you should stop investing in stocks is a personal decision that will vary from person to person. The right answer depends on a wide variety of factors, from your life expectancy to your health situation to your own personal risk tolerance.
Should I keep my stocks forever? ›
Instead of timing the market, consider spending time in the market. You may find that a passive investment strategy, such as buying and holding stocks for a long time, can help you accumulate wealth.
Is 70 too late to start investing? ›
But the truth is, it's never too late. Investing is something that can benefit us at all stages of life, there might just be different considerations to take into account.
How much money do most 70 year olds have? ›
How Much Does the Average 70-Year-Old Have in Savings?
- $60,000 in transaction accounts (including checking and savings)
- $127,000 in certificate of deposit (CD) accounts.
- $17,000 in savings bonds.
- $43,000 in cash value life insurance.
Indeed, a good mix of equities (yes, even at age 70), bonds and cash can help you achieve long-term success, pros say. One rough rule of thumb is that the percentage of your money invested in stocks should equal 110 minus your age, which in your case would be 40%. The rest should be in bonds and cash.
Should retirees stay in the stock market? ›
The short answer is yes. One of the most daunting aspects of retirement is making sure you have enough money to live on until you die. With looming threats of Social Security cuts, longer life expectancy and rising health care costs, making your money go as far as it can is more important now than ever before.
