Should You Own Stocks in Retirement?

After spending decades saving and investing, the last thing you want to do is expose your hard-earned wealth to undo risks when you get to retirement. Therefore, it’s not irrational to question the role stocks play in your financial plan in retirement — it’s no secret that stocks carry more risk than other types of investments. It begs a question: Should you own stocks in retirement?

While everyone’s financial needs are different, it’s generally a good idea to keep at least a portion of your nest egg invested in the stock market through retirement. In fact, it may be risky not to own stocks.

“Sometimes people get to a point where the value of their portfolio reaches the number they were striving for, and then they stop and shift to cash,” says Matt Wilbur, Senior Director of advisory investments at Northwestern Mutual. “But this ignores the fact that from that point on, the biggest threat to their portfolio is not what they’re invested in, but what they aren’t invested in.”

Your goal in retirement is typically to allocate your portfolio in a way that generates steady, reliable income for the rest of your life as well as grow your assets. That income may come from any combination of bonds, annuities, cash value life insurance*, Social Security, pensions and, yes, stocks. Although you’re generally taking less risk in your portfolio at this stage in life, here’s one big reason why some exposure to the stock market can foster a financially healthy retirement.


Like the wind, inflation is an invisible force that slowly erodes even a mountain of savings. Given we’ve been living in a rather sustained period of low inflation, it’s easy to overlook it today. Unfortunately, it’s hard to forecast what the rate of inflation will be next year, let alone 10 years from now.

If, or when, inflation accelerates, the purchasing power of your savings will decline over time if your money doesn’t keep pace. That means every dollar you’ve saved today will purchase fewer goods and services in the future. It may be easy to brush off modest inflation from one year to the next, but it can really add up over time. For example, $1 in 2000 would only purchase $0.66 worth of goods and services today. 

When it comes to inflation, there’s one particular cost to be aware of: healthcare. The simple fact is that as you age your medical needs are bound to increase. And not only can you expect your utilization of healthcare to increase, the cost of all those services and prescriptions will likely also rise over time. Frankly, medical costs may pose a larger risk to your retirement savings than inflation.

“Health care costs, on average, have been rising at about double the rate of inflation,” says Wilbur.


For starters, you may want to keep some exposure to the stock market in your financial plan. It’s all about managing your asset allocation and risk exposure, which a financial advisor can help you with. Stocks can provide growth in your portfolio, which could help your savings keep pace with rising costs.

“In retirement, you’re looking for some income. That typically means avoiding small-cap, hyper-growth names and focusing on a core or equity-income strategy,” says Wilbur. “Blue-chip, dividend-paying stocks can be a smoother ride in retirement. They tend to provide you some inflation-fighting power, and income, in your portfolio.”

Wilbur says don’t forget about other more niche asset classes like commodities and, on the fixed-income side, Treasury Inflation Protected Securities (TIPS) that can help you further hedge against unexpected inflation.

“For the past several years inflation has been pretty tame, and people may extrapolate that trend into the future,” says Wilbur. “It’s always a good idea to have a hedge against inflation.”

If you’re worried about juggling it all in retirement, or you just want to leave the dollars and cents to someone else, a financial advisor can help account for inflation, rising costs and tax uncertainties in a financial plan that’s tailored to your needs.

This material does not constitute investment advice and is not intended as an endorsement of any investment or security.  All investments carry some level of risk including the potential loss of all money invested.  No investment strategy can guarantee a profit or protect against a loss. * The primary purpose of life insurance is the death benefit.  Accessing cash value will decrease the death benefit and any loans should be managed properly to avoid an unexpected taxable event.


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