Finding Your Sweet Spot: How Much Should a Retiree Have in Stocks?

Have you ever laid awake at night wondering if your retirement portfolio has too many stocks? Or maybe not enough? You’re definitely not alone in this worry. As someone who’s spent years helping folks navigate the tricky waters of retirement planning, I’ve seen this question cause more anxiety than almost any other investment decision.

To answer this important question that affects millions of retirees, I’m going to break it down today: how much of your retirement savings should you put into stocks?

The Old Rule of Thumb: Is It Still Relevant?

The “100-minus-your-age” rule has been used by financial advisors for decades as a quick way to figure out how much stock to buy. The idea is easy to understand: take your age away from 100 to find out how much of your money you should have in stocks.

For example:

• If you’re 60, you’d have 40% in stocks
• If you’re 70, you’d have 30% in stocks
• If you’re 80, you’d have just 20% in stocks

The main reason this formula was made was to protect against investment risk in retirement. If you want to avoid losing a lot of money when the market goes down, you should own fewer risky assets like stocks as you get older.

But here’s the million-dollar question: Is this old-school rule still applicable in 2025?

Why the Traditional Rule Might Be Outdated

The way people retire has changed a lot in the last few decades. Our parents and grandparents often had

• Company pensions
• Rarely worked during retirement
• Shorter lifespans

Today’s retirees face a completely different reality

• More likely to have part-time jobs in retirement
• Often own income-producing annuities
• May live well into their 90s (thanks to better healthcare)
• Need to combat inflation for potentially 30+ years

Because of these shifts, many financial experts now believe the traditional rule might be too conservative for modern retirees.

What Real Retirees Are Actually Doing

According to a Vanguard report on retirement plans, investors aged 65 and older had an average of 49% of their portfolios allocated to stocks at the end of 2023. That’s significantly higher than what the 100-minus-your-age rule would suggest!

Even target-date funds, which automatically adjust your asset allocation as you age, typically maintain higher stock allocations than the traditional rule recommends:

• Vanguard Target Retirement 2025 Fund: 51% in stocks
• Vanguard Target Retirement 2035 Fund: 68% in stocks

The Risks of Having Too Much (or Too Little) in Stocks

Before we dive into specifics, let’s be real about the risks on both sides:

Risks of Too Much in Stocks:

1. Market volatility can force you to sell at worst possible times
2. Psychological stress during market downturns
3. Less predictable income stream

Risks of Too Little in Stocks:

1. Inflation may erode your purchasing power
2. Your money might not last through a 30-year retirement
3. Lost growth opportunity for legacy planning

As Keith Beverly, chief investment officer at Re-Envision Wealth, points out: “Once you get comfortable with the worst-case scenario, then you know that’s likely the right portfolio for you.” In other words, could you still meet your spending needs if stocks fell 30% or more?

Better Approaches for Modern Retirees

1. Consider All Your Income Sources

The amount you should have in stocks depends heavily on your other income streams. Ask yourself:

• How much income comes from guaranteed sources like Social Security, pensions, or annuities?
• Do these sources cover most of your essential expenses?

As Rob Williams from the Schwab Center for Financial Research explains: “If these income streams generate enough income to cover the majority of your expenses, you might be able to maintain a more aggressive stance with your portfolio well into retirement.”

2. The Bucket Strategy: A Smarter Alternative

Instead of the one-size-fits-all 100-minus-your-age approach, many financial planners now recommend a “bucket strategy” that divides your assets based on when you’ll need them:

Bucket 1 (Short-term): Cash for immediate needs

• 1 year of expenses in cash/money market accounts
• Very low risk, highly liquid

Bucket 2 (Mid-term): Income and moderate growth

• 2-4 years of expenses
• Short-term bonds, CDs, defensive stocks
• Moderate risk

Bucket 3 (Long-term): Growth-focused investments

• Expenses beyond 7 years
• Primarily stocks for growth
• Higher risk but longer time horizon

This approach helps you avoid selling stocks during market downturns while still maintaining growth potential for your long-term needs.

3. Age-Based Portfolio Shifts

While the exact percentages will vary based on individual circumstances, here’s a general framework that many modern advisors suggest:

Ages 60-69: Moderate portfolio

• 60% stocks
• 35% bonds
• 5% cash/cash investments

Ages 70-79: Moderately conservative

• 40% stocks
• 50% bonds
• 10% cash/cash investments

Ages 80+: Conservative

• 20% stocks
• 50% bonds
• 30% cash/cash investments

Practical Ways to Balance Income and Growth

Once you’ve determined your overall allocation strategy, here are some specific tactics to help balance income needs with growth potential:

Build a Bond Ladder

Purchasing bonds with staggered maturity dates provides regular income while helping manage interest rate risk. For example, you might buy bonds that mature in 1, 2, 3, 4, and 5 years, and then reinvest as each matures.

Focus on Dividend-Paying Stocks

Companies with long histories of paying (and increasing) dividends can provide both income and growth potential. These tend to be more stable than growth stocks and can form the backbone of your stock allocation.

Protect Against Market Downturns

From the 1960s through 2023, the average recovery time for stocks after bear markets was about 3.5 years. That’s why having 2-4 years of living expenses in more conservative investments is so important – it gives your stocks time to recover.

Real-Life Example: Why One Size Doesn’t Fit All

Doug Carey, a CFA at WealthTrace, shares a perfect example of why the rule of 100 doesn’t work for everyone:

“Let’s say a 60-year-old couple has $3 million saved, and they are retiring this year. They have combined pensions and Social Security benefits of $125,000 annually. Their annual expenses are $75,000.”

According to the rule of 100, this couple should have just 40% in stocks. But since their guaranteed income already covers all their expenses, they’ll never need to touch their principal during normal circumstances.

In this case, Carey suggests they could comfortably have 60-70% in stocks, since their time horizon for that money is essentially infinite – it might even be passed to heirs who won’t touch it for decades!

My Personal Take on Stock Allocation in Retirement

After years of helping folks plan their retirements, I’ve come to believe that your stock allocation should depend on three main factors:

1. Your income gap: The difference between your guaranteed income and essential expenses
2. Your time horizon: Not just your age, but how long the money needs to last
3. Your personal risk tolerance: Some people simply can’t sleep at night with a high stock allocation, regardless of what the math says

For most of my clients, I’ve found that maintaining at least 30-40% in stocks throughout retirement is essential for combating inflation, even into their 80s and beyond. But I always tailor this based on their unique situation.

Today’s Interest Rate Environment Creates Opportunity

With interest rates higher than they’ve been in years, retirees now have a unique opportunity to lock in decent yields on the fixed-income portion of their portfolios.

As Lazetta Rainey Braxton, co-CEO at 2050 Wealth Partners, points out: “Investors have a chance to lock in higher yields of 4 or 5 percent, which is only slightly below long-term stock market returns.” This makes it an excellent time to consider adjusting your allocation if you’ve been too heavily weighted toward stocks.

Questions to Ask Yourself About Your Stock Allocation

1. Could I meet essential expenses if my stock portfolio dropped 30%?
2. How much of my retirement income comes from guaranteed sources?
3. Do I have separate funds set aside for short-term needs?
4. What’s my true time horizon for different portions of my portfolio?
5. How did I react emotionally during previous market downturns?

Bottom Line: There’s No Magic Number

While I wish I could give you a simple formula that works for everyone, the truth is that the “right” amount of stocks for a retiree depends on many factors. The traditional 100-minus-your-age rule provides a starting point, but it’s just that – a starting point.

For most retirees in 2025, maintaining a higher stock allocation than previous generations makes sense given longer lifespans and the need to combat inflation. But this should always be balanced against your income needs, other resources, and personal comfort with market fluctuations.

Remember, retirement planning isn’t just about maximizing returns – it’s about creating a portfolio that helps you sleep at night while still meeting your long-term goals. Sometimes, that means taking a bit more risk than conventional wisdom suggests. Other times, it means prioritizing peace of mind over potential growth.

What’s your current stock allocation in retirement? Are you comfortable with it, or are you considering making changes? I’d love to hear your thoughts and experiences in the comments below!