Many older Americans are following that advice. As The Street reported earlier this year, 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.
“The most important thing is income,” Heyman said “Do you have enough based on your allocation and the potential volatility in stocks to finance your spending if you live as long as possible?”
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.
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.
The Federal Reserve also measures median and mean (average) savings across other types of financial assets. According to the data, the average 70-year-old has approximately: $60,000 in transaction accounts (including checking and savings)$127,000 in certificate of deposit (CD) accounts.
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.
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.
Experts with the Motley Fool suggest allocating an even higher percentage to stocks until at least age 50 since 50-year-olds still have more than a decade until retirement to ride out any market volatility.
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.
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.
Social Security offers a monthly benefit check to many kinds of recipients. As of December 2023, the average check is $1,767.03, according to the Social Security Administration – but that amount can differ drastically depending on the type of recipient. In fact, retirees typically make more than the overall average.
Investing in an income annuity should be considered as part of an overall strategy that includes growth assets that can help offset inflation throughout your lifetime. Most financial advisors will tell you that the best age for starting an income annuity is between 70 and 75, which allows for the maximum payout.
According to data from the BLS, average 2022 incomes after taxes were as follows for older households: 65-74 years: $63,187 per year or $5,266 per month. 75 and older: $47,928 per year or $3,994 per month.
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.
Your net worth is what you own minus what you owe. It's the total value of all your assets—including your house, cars, investments and cash—minus your liabilities (things like credit card debt, student loans, and what you still owe on your mortgage).
The average retirement savings for all families is $333,940 according to the 2022 Survey of Consumer Finances. Taken on their own, those numbers aren't incredibly helpful. There are a variety of decent retirement savings benchmarks out there, but how much money other people have isn't one of them.
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.
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.
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.
Introduction: My name is Edwin Metz, I am a fair, energetic, helpful, brave, outstanding, nice, helpful person who loves writing and wants to share my knowledge and understanding with you.
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