Older Americans' Retirement Savings Too Stock-Heavy

A new survey of 401(k) plans finds a significant number of older Americans have their retirement savings too heavily invested in stocks.

Many older Americans have too much of their retirement savings in stocks, according to study from Fidelity Investments.

Fidelity analyzed 401(k) holders nearing retirement age, comparing their accounts to an age-based target date fund. They found 18% of people aged 50-54 had a stock allocation at least 10% higher than the recommended level. Workers ages 55-59 had an even higher rate of high stock allocations, with 27% having significantly higher allocations than Fidelity advises.

What’s more, 11% of workers ages 50-54 had their entire 401(k) assets in stocks, while 10% of people ages 55-59 were banking entirely on the stock market.

That’s perhaps understandable, given that the stock market has generally been on the rise in recent years. But Jim MacDonald, president of workplace investing at Fidelity, said Baby Boomers nearing retirement should be more careful with their nest eggs.

“One thing we learned from the last recession is that having too much stock, based on your target retirement age, in your retirement account can expose your savings to unnecessary risk — it’s the hidden danger that many workers are unaware of,” he said, in a press release. “This is especially true among workers nearing retirement, who should be taking steps to protect what they’ve worked so hard to save.”

MacDonald said workers should try to time the market. But he said it is important to check your portfolio on a regular basis to ensure your asset allocation remains on track.

He said a variety of tools are available and easily accessible, including a suite of tools from Fidelity.

Overall, Fidelity found the average 401(k) balance was $91,100 in the second quarter of this year, down about $700 from the previous quarter. The average 12-month total savings amount for a 401(k), including worker and employer contributions, was $10,180 in the second quarter, up from $9,840.