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.
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.
You might have switched to the spending phase of your retirement plan, but that doesn't mean you shouldn't invest any longer, or plan for market volatility. Investing is a smart financial move to make regardless of what stage you're at in life.
While, again, this depends entirely on your individual needs, many retirement advisors recommend higher-growth assets around the following proportions: Age 65 – 70: 50% to 60% of your portfolio. Age 70 – 75: 40% to 50% of your portfolio, with fewer individual stocks and more funds to mitigate some risk.
But for older Americans, it's more than double that amount. According to the Fed data, the median net worth peaks between ages 65 and 74 and then falls when retirees enter their late 70s and beyond. Americans ages 75 and up have a median net worth of $254,800.
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.
A general rule of thumb says it's safe to stop saving and start spending once you are debt-free, and your retirement income from Social Security, pension, retirement accounts, etc. can cover your expenses and inflation.
A general rule of thumb is to subtract your age from 110. The result is the percentage of your retirement portfolio that should be invested in stocks. More risk-tolerant investors can subtract their age from 120, while those who are more risk-averse can do the same from 100.
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.
Bottom Line. The IRS allows no specific tax exemptions for senior citizens, either when it comes to income or capital gains. The closest you can come is contributing to a Roth IRA or Roth 401(k) with after-tax dollars, allowing you to withdraw money without paying taxes.
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.
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.
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.
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.
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.
For example, one rule suggests having a net worth at 70 that's equivalent to 20 times your annual expenses. If you spend $100,000 a year to live in retirement, you should have a net worth of at least $2 million.
Introduction: My name is Van Hayes, I am a thankful, friendly, smiling, calm, powerful, fine, enthusiastic person who loves writing and wants to share my knowledge and understanding with you.
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