- After a spectacular decade for the US stock market, baby boomers are reluctant to transition into defensive investments.
- According to one study, most boomer retirement accounts are overweight on stocks.
- That could put retirees and near-retirees at risk when the next recession strikes.
A senior executive at the AARP made headlines this week for responding to the “Ok boomer” meme on social media with this charming retort:
OK, millennials. But we’re the people that actually have the money.
But according to a recent report by Fidelity Investments, “boomers” might not have the money for much longer. The $2.5 trillion investment giant warns that baby boomer retirement accounts have over-allocated their savings in stocks.
The financial planning company says this exposes their wealth to “unnecessary risk, especially if the market was to trend downward.”
Fidelity: Boomer Stock Market Exposure a Retirement Risk
In Fidelity’s Quarterly Retirement Trends Report for Q3 2019, the company’s president of workplace investing, Kevin Barry, says:
While the market’s performance over the last few years has had a positive effect on many retirement account balances, it may have also contributed to some individuals having more stock than is recommended.
How many individuals? Fidelity says 23.1% of 401(k) savers have an asset allocation with a higher than recommended percentage of equities.
Among baby boomers, American investors aged 55-to-75, that figure is higher: 37.6% are over-exposed to the stock market, and the risk of a downturn in stock prices. Astoundingly, nearly 8% of baby boomers with 401(k)s have 100% of those savings in the stock market.
To manage risk and contain losses, Fidelity recommends a well-balanced portfolio to allocate 35% of assets to US stocks, and 15% to foreign stocks, for a total equities…