75-Year-Olds Should Have This Much Invested In the Stock Market (2024)
Vance Cariaga
·3 min read
Conventional wisdom holds that when you hit your 70s, you should adjust your investment portfolio so it leans heavily toward low-risk bonds and cash accounts and away from higher-risk stocks and mutual funds. That strategy still has merit, according to many financial advisors. But with people living longer, you should devote a higher proportion of your portfolio to stocks now than seniors 30 or 40 years ago.
Many older Americans are following that advice. As The Street reported recently, among older seniors with taxable brokerage accounts at Vanguard, nearly one-quarter of those aged 75 to 84 had nearly a 100% weighting in stocks. Even one-fifth of investors 85 and older had a similar weighting in stocks.
Mick Heyman, an independent financial advisor in San Diego, told The Street that one reason older investors are keeping more money in stocks these days is to avoid capital gains taxes for selling them (assuming that they are in non-retirement accounts).
“If you originally had 60% to 70% of your assets in stocks, maybe you’re now at 70% to 80%,” he said.
As for why many older investors are investing more in stocks, much of that has to do with income — an important consideration for those who expect to live a long time in retirement.
Americans Living Longer, Meaning Retirement Investment Mixes Have Changed
In terms of how much money you should have in the stock market at age 75: That depends on several different factors, ranging from your health and preferred lifestyle to your debt load, net worth, monthly bills, income sources and risk tolerance.
One old bit of general wisdom cited by CNN is that you should subtract your age from 100 to come up with the percentage of your portfolio that should be in stocks. If you’re 75, for example, then you should have 25% in stocks.
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.
According to a recent analysis from Empower, a financial services company, investors in their 70s and over keep between 31% and 33% of their portfolio assets in U.S. stocks and between 5% and 7% in international stocks. Among the investors that Empower analyzed, here’s the breakdown by age group based on average holdings:
Age
U.S. stocks
International stocks
70s
$247,645
$39,774
80s
$196,042
$24,795
90s
$145,292
$13,183
In terms of bond holdings as a percentage of their overall portfolio, here’s how older investors break down:
Age
U.S. bonds
International bonds
70s
11.39%
2.04%
80s
11.05%
1.81%
90s
9.97%
1.32%
Like most investors, seniors tend to have less money in alternative investments. Here’s a looks at the money older investors have in alternative investments and their percentage of the overall portfolio.
If you're 75, for example, then you should have 25% in stocks. 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.
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.
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.
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.
For most retirees, investment advisors recommend low-risk asset allocations around the following proportions: Age 65 – 70: 40% – 50% of your portfolio. Age 70 – 75: 50% – 60% of your portfolio. Age 75+: 60% – 70% of your portfolio, with an emphasis on cash-like products like certificates of deposit.
The safest place to put your retirement funds is in low-risk investments and savings options with guaranteed growth. Low-risk investments and savings options include fixed annuities, savings accounts, CDs, treasury securities, and money market accounts. Of these, fixed annuities usually provide the best interest rates.
While retirees should in most cases be in the stock market, it can be so volatile in times of economic uncertainty. It's always wise to secure other ways to maximize your retirement resources so you don't find yourself in an unpleasant situation.
Over the long term, stocks outperform bonds. So, stock market investments should be one component of a plan you use to prevent your savings from running dry before the end of a retirement that can last 20 or 30 years or longer.
The common rule of asset allocation by age is that you should hold a percentage of stocks that is equal to 100 minus your age. So if you're 40, you should hold 60% of your portfolio in stocks. Since life expectancy is growing, changing that rule to 110 minus your age or 120 minus your age may be more appropriate.
Some financial advisors recommend a mix of 60% stocks, 35% fixed income, and 5% cash when an investor is in their 60s. So, at age 55, and if you're still working and investing, you might consider that allocation or something with even more growth potential.
During your working years, you should aim to have enough cash in an emergency fund to cover three months' worth of living costs at a minimum. For retirement, you'll really want more like one to two years' worth.
However, not a huge percentage of retirees end up having that much money. In fact, statistically, around 10% of retirees have $1 million or more in savings.
Despite the ability to access retirement accounts, many experts recommend that retirees keep enough cash on hand to cover between six and twelve months of daily living expenses. Some even suggest keeping up to three years' worth of living expenses in cash. Your emergency fund must be easy for you to access at any time.
For example, if you were 70 years old, you'd have about 30 percent allocated to stocks. “That formula is generally a good place to start,” says Keith Beverly, chief investment officer at wealth management firm Re-Envision Wealth.
According to a 2020 working paper from the Center for Retirement Research at Boston College, the top 1% of retirees-which a retiree with $4 million in assets would fall into-can expect to pay about 22.7% in state and federal taxes.
According to EBRI estimates based on the latest Federal Reserve Survey of Consumer Finances, 3.2% of retirees have over $1 million in their retirement accounts, while just 0.1% have $5 million or more.
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