Many boomers still own too much stock: Fidelity

Many boomers still own too much stock: Fidelity

Fidelity released an update on its retirement trends for the third quarter, a snapshot of the activity in the company’s 30 million retirement accounts.

Due to the market’s upswing over the spring and summer since the initial coronavirus crash in March, the company reported a record-number of 401(k) millionaires. But the company found a worrisome trend continuing: there are many baby boomers who own too much stock.

The company said that 38% of its boomer cohort, now age 56 to 74, had more stock than recommended for their age group, which exposes them to “unnecessary risk,” the company said. (The threshold for “more” was at least 10% more.) Seven percent of boomers with retirement accounts at Fidelity actually have 100% stock in their retirement account. Around a third of boomers have moved savings into “more conservative investments,” the company said.

The metric for how much stock you “should” have comes from Fidelity’s target date funds, which each have a “glide path” that starts younger investors off with a lot of stock and as the fund and person ages, it sheds stocks and holds more bonds to protect the nest egg against volatility, especially as seniors need to spend their money during retirement.

Fidelity told Yahoo Finance that the number of boomers’ 401(k) accounts with all-stock portfolios has actually declined a little, from 10% five years ago and 12.8% 10 years ago. A company spokesperson added that many people have good reasons to have that much stock, but that Fidelity wanted to simply bring it to customers’ attention just in case.

“For people who are nearing retirement, we don’t want them to be surprised and possibly be taking on more risk than they are comfortable with,” a spokesperson said. “As is our standard approach, we recommend people put together a plan – and especially for people who are nearing retirement and will soon be shifting from the ‘accumulation’ stage to the ‘decumulation’ stage.”

One challenge Fidelity faces is to convince people in a bull market to de-risk and hedge. FOMO may keep them more exposed than they should be, according to Fidelity’s experts. And the fact that the market has bounced back and boomed despite a pandemic and record unemployment may add to investors’ feelings of invincibility. That is, if they even remember the market crashed over 30% this year off its peak in February.

Ethan Wolff-Mann is a writer at Yahoo Finance focusing on consumer issues, personal finance, retail, airlines, and more. Follow him on Twitter @ewolffmann.

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