It Isn’t Just Boomers. Lots of Older Americans Are Stock Obsessed.

American retirees are investing more like 30-year-olds. 

Rather than follow the conventional wisdom to protect their nest eggs by shifting their investments from stocks to bonds as they age, many are rolling the dice. 

Nearly half of Vanguard 401(k) investors actively managing their money and over age 55 held more than 70% of their portfolios in stocks. In 2011, 38% did so. At Fidelity Investments, nearly four in 10 investors ages 65 to 69 hold about two-thirds or more of their portfolios in stocks.

And it isn’t just baby boomers. In taxable brokerage accounts at Vanguard, one-fifth of investors 85 or older have nearly all their money in stocks, up from 16% in 2012. The same is true of almost a quarter of those ages 75 to 84.

Having significant exposure to stocks later in life can be risky, advisers and economists say, if only because if the market were to tumble, retirees needing cash may have no choice but to sell their shares at bargain prices.

Many changes over the past half-century have contributed to older Americans’ reliance on stocks, including the 1978 tax-law change that ushered in the 401(k) and several decades where stocks have bested bonds. During financial or economic crises—including in 1987, 2001, 2008 and 2020—the Federal Reserve or Congress often stepped in to support the economy. 

“The spirit of the times is ‘Don’t worry about the markets crashing. They will come back up and set new highs,’” said Robert Shiller, a Nobel Prize-winning economist at Yale University.

Catching Up

Toby Bloom, 63, tried investing 60% of his retirement savings in stocks and 40% in bonds. But five years ago, the Albuquerque resident realized his returns weren’t high enough to achieve his goal of retiring by 2026 with at least $40,000.

So he moved 80% of his money into dividend-paying and other stocks in his IRA, which now holds $21,000. 

“I am not going to make any money for retirement by being overly stodgy and conservative,” said Bloom, an insurance agent. 

Stan Galperin, 80, started trading stocks a few years after retiring from a career running video rental and grocery stores in southern New Jersey. In 2013, he moved to The Villages, a sprawling retirement community in Florida, and co-founded an investment club. He sold the bonds that had comprised 40% of his portfolio and began trading stocks.

“Interest rates were so low it didn’t pay to hold bonds,” said Galperin. But now, with rates higher, he has moved more of his portfolio into money-market accounts and continues to trade stocks. 

Many older investors remain bullish on stocks for one simple reason: Returns.

Since 1982, the S&P 500 has returned 10.1% a year, on average. That is significantly more than the index’s long-term average annual return of 7.4% a year since 1928, according to Dow Jones Market Data.

Lack of Options

Wayne Winquist, 72, a Fitchburg, Wis., retiree with 98% of his portfolio in stocks, said he is staying in stocks because he sees no good alternatives.

“I don’t like cash and I don’t like bonds,” Winquist said. “Both are losers’ games when it comes to inflation.”

Winquist invests 70% of his $3 million portfolio in stocks that pay dividends. He also trades options, pocketing payments for giving others the right to buy his shares for a set price if the stock rises above that level.

He and his wife mainly live on Social Security benefits. Last year, he said they used some of the $150,000 they earned in dividends to buy more stock. A church elder who writes an investing blog, he also used a large chunk of that money for charitable giving. 

The former information-technology executive began investing in his employer’s 401(k) plan in the early 1980s. In 1995, he hired a broker to manage a $20,000 windfall from stock options. By 2001, Winquist had lost $7,500 of that money after two of the broker’s picks went out of business. 

“I became skeptical of the experts,” he said.

In 2001, Winquist fired his broker and began buying shares in technology companies. He says years of investing have taught him to screen out market selloffs. “The long-term slope of the market is upward.”

As the beneficiaries of high stock-market returns, baby boomers tend to report a greater willingness to take financial risks than those who lived through the Great Depression, according to research by Ulrike Malmendier, a professor of economics and finance at the University of California, Berkeley, and Stefan Nagel, a professor of finance at the University of Chicago.  

“It’s what we have lived through personally that emotionally wires our brains for risk-taking,” Malmendier said. 

In contrast to younger Americans, boomers are also more likely to take a do-it-yourself approach to managing their money. Among baby boomers with 401(k) accounts at Fidelity Investments, 53% pick their own investments, compared with 42% in Generation X and 25% of millennials.

For three decades, Marty Modrowski, 59, of Toledo, Ohio, has picked his own investments.

The software consultant made his first stock purchase in college when he spent $550 to buy beaten-down shares of Bank of America during the 1987 stock-market crash. 

Modrowski said he made a costly mistake in 2008 when he sold some of his stocks as the market plummeted, leaving fewer shares in his portfolio when a recovery began in 2009.

“What does it even mean to take risk off the table as you age?” he said, adding that due to inflation, bonds and cash are risky too. “Nothing is totally safe.”

Modrowski plans to work full-time for at least five more years. He currently has nearly 80% of his portfolio in stocks. 

“In my lifetime, there have been so many crises, from the Mexican debt crisis to the failures of Long-Term Capital Management and Lehman Brothers. It always seems that everything turns out all right,” said Modrowski.

Write to Anne Tergesen at [email protected]