Whether you’re nearing retirement or already living your golden years, it makes sense to take on less risk with your investments. You’ll want to preserve your hard-earned savings. So you may be considering moving away from stocks and other equities to focus on fixed income.
But by doing so, you may be taking on some unexpected risk. You still need room for serious growth, and here’s why.
Inflation Risk
Simply put, today’s dollars will purchase less goods in the future. Inflation can erode even the hardest nest eggs.
And it’s impossible to predict how severe inflation will be in the next few years. Look back to 2022, when inflation soared to record-breaking levels. This came following more than two decades of generally low and stable inflation prior to COVID-19.
And it’s also impossible to know just how long you’d need to ride out inflation. People are living longer. And as you age, it’s natural for healthcare to become a bigger concern. The bad news is that historically, healthcare cost inflation has risen faster than traditional inflation.
But historically, the stock market has outpaced inflation. So in retirement, you wouldn’t want to ignore growth-oriented equities such as stocks, exchange-traded funds (ETFs), and mutual funds.
But it’s important to always keep your portfolio diversified.
How Much Should Be Invested in Stocks at Retirement?
The portion of your portfolio that should be invested in stocks and other equities depends on personal factors, including your risk tolerance, lifestyle, and investing goals.
But, many financial advisers recommend the rule of 110. This involves subtracting your age from 110. The result would be the percentage of your portfolio that could be dedicated to stocks and other equities.
So if you’re 65, this rule dictates you should keep 45 percent (110 – 65) in equities. Those with a higher risk tolerance can consider the rule of 120. In this case, that would result in 55 percent in stocks.
But diversification is about more than just figuring out how to break up your portfolio along general asset classes.
What Kinds of Equities Should Retirees Invest In?
Some advisers recommend that retirees focus on low-cost, broad-market index funds and ETFs to fill the equity portion of their portfolios. These can provide exposure to hundreds of large-cap stocks from established companies.
Moreover, dividend-paying stocks and ETFs can provide a reliable source of income as well as capital appreciation. But be sure to carefully analyze these and all other investments. Consider stocks and well-diversified ETFs that have a long history of consistently paying and increasing dividends.
You can also look into defensive sector stocks and funds. Companies in sectors such as utilities and consumer staples have historically remained resilient even during market downturns.
Consider the Bucket Strategy
Stocks and other equities can also be incorporated into the bucket strategy. This breaks down your retirement assets based on time and risk-level.
The first bucket can hold highly liquid and low-risk assets such as cash in high-yield savings accounts, money market funds, and certificates of deposit. This could cover the first three years of retirement. The second bucket could be filled with mid-risk assets, including bonds and bond funds meant to cover the next four to seven years of retirement. And the third bucket can hold growth-focused assets, including stocks and ETFs to cover the rest of retirement.
The general idea here is that you can turn to your lower-risk buckets during the early years of retirement and give your stock bucket time to grow to maximize your earnings.
This strategy may also protect you from a sequence of returns. This involves drawing down your retirement savings during a market downturn. That could result in selling a larger portion of investments to generate the same target amount of cash.
And it leaves fewer shares that could grow when the market recovers. At worst, you end up depleting your retirement portfolio faster than expected.
The Bottom Line
The idea of moving away from generally riskier investments such as stocks when you’re in retirement makes sense. But completely ignoring stocks and other growth-focused assets can be risky in itself. Uncertainties such as unprecedented inflation, your life span, and market downturns can result in the depletion of your entire retirement portfolio before you expected.
However, you can protect yourself by diversifying your portfolio with stocks and other equities in a way that aligns with your investment goals, risk tolerance, lifestyle, and other personal factors. To come up with a personalized retirement investing and drawdown plan, you may wish to work with a qualified financial adviser.
The Epoch Times copyright © 2026. The views and opinions expressed are those of the authors. They are meant for general informational purposes only and should not be construed or interpreted as a recommendation or solicitation. The Epoch Times does not provide investment, tax, legal, financial planning, estate planning, or any other personal finance advice. The Epoch Times holds no liability for the accuracy or timeliness of the information provided.
