Baby boomers need to invest in stocks to ensure their savings will cover years
of retirement, a Boca Raton, Fla., financial planner writes in her latest
But they also need to be careful they don't plow too much in stocks at the expense of losing much of their savings during a dramatic downturn, said certified financial planner Mari Adam.
An analysis of more than 20 million 401k accounts by the nonprofit Employee Benefit Research Institute "reveals that some investors are still challenged by how to pick the right investment mix for their age and risk tolerance," Adam wrote. "That's a problem, since 401k (retirement savings plans) are now the principal vehicle for Americans to save for their retirement."
More than 20 percent of sixtysomething workers with 401k accounts "have plowed 80 percent or more of their account balances into stocks," Adam said, citing the EBRI data. "They run the risk of seeing their retirement nest egg lose a third or more of value on the eve of retirement, if there's a major market selloff."
On the other extreme, nearly a fifth of investors in their sixties have no money invested in stocks, she said. "With today's retiree preparing for twenty to thirty years in retirement, that strategy is unlikely to keep up with rising medical and other living expenses," Adam said.
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