Fidelity Warns That Boomers Are Too Invested in Stocks

Advertising Disclosure: When you buy something by clicking links on our site, we may earn a small commission, but it never affects the products or services we recommend.

Image Not Available

One of the biggest administrators of U.S. retirement plans is warning baby boomers that they might have too much retirement money invested in stocks.

Fidelity Investments’ quarterly analysis of its customers’ 401(k) accounts and individual retirement accounts (IRAs) shows that many older 401(k) account holders have stock allocations higher than recommended for their age group.

The findings of the analysis, which were released Thursday, include:

  • 18 percent of people ages 50-54 had a stock allocation at least 10 percent higher than recommended, and 11 percent had 100 percent of their 401(k) assets in stocks.
  • 27 percent of people ages 55-59 had a stock allocation at least 10 percent higher than recommended, and 10 percent had all of their 401(k) assets in stocks.

Fidelity’s president of workplace investing, Jim MacDonald, states in a press release:

“One thing we learned from the last recession is that having too much stock, based on your target retirement age, in your retirement account can expose your savings to unnecessary risk — it’s the hidden danger that many workers are unaware of. This is especially true among workers nearing retirement, who should be taking steps to protect what they’ve worked so hard to save.”

Fidelity did not offer precise recommendations for how much stock baby boomers should hold.

Instead, it simply noted that a booming stock market over the past five years has left many investors with a greater percentage of their 401(k) plans invested in stocks. That leaves such investors more vulnerable to the ravages of a stock market downturn.

If you’re unsure how much of your savings should be in stocks, start with the formula that Money Talks News founder Stacy Johnson suggests as a guideline:

  1. Decide how much you can put into long-term savings. “Long-term” means money you won’t need for at least five years.
  2. Subtract your age from 100 and put that percentage of your long-term savings into a simple, unmanaged stock index fund. So if you’re 40, that’s 60 percent of your savings.
  3. Take the remaining part of your long-term savings and divide it equally. Leave half in an interest-bearing, risk-free savings account, and put the other half into a bond mutual fund.

To learn more about investing your retirement savings wisely, check out:

Do you feel you’re over-invested in stocks right now? Let us know what you think below or on Facebook.

Get smarter with your money!

Want the best money-news and tips to help you make more and spend less? Then sign up for the free Money Talks Newsletter to receive daily updates of personal finance news and advice, delivered straight to your inbox. Sign up for our free newsletter today.