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Why Retirees Are Holding More Stocks

Why Retirees Are Holding More Stocks

July 25, 2023

A recent Wall Street Journal article state that at Vanguard, 20% of taxable brokerage accounts held by people 85 and older, have nearly all of their money in stocks. The short answer as to why is they are trying to make up for losses or inadequate savings. Both of those answers are likely true, it just depends on how much of one is true versus the other.

Standard advice states that as you get closer to, then subsequently in retirement, the fewer stocks you should have, the more conservative you need to be. Stocks rise and fall more than bonds and cash. Investors in this age bracket have less time available to make that money back if there is a decline in the market.

I would caution you investors that are in or near retirement. Inflation is improving. The most recent reading was at 3%. It may seem we are in the clear, but only 5 stocks in the S&P 500 are keeping that index in the green. Earnings of the other 495 companies in the index are on pace to fall an average of 9%. When there's that much divergence in the market, returns that follow aren't all that great.

While we're talking about inflation, we need to talk about how small businesses are still hurting even though inflation is improving. And it has less to do with low inflation causing problems and more to do with the conditions of the economy over the last three years still having negative implications for small businesses. Keeping the shelves stocked and finding help are the biggest problems right now. Wage inflation is good for workers, but it squeezes small businesses because large companies have the cash flow to pay new hires more, whereas small businesses don't have that luxury.

If there's a small business in your area and it's within your budget, stop there for some of your goods and services instead of the large corporations.

Now that we got a little bit of news out of the way, I want to talk about a project that I'm working on.

Financial literacy is severely lacking in this country. Poor economics aside, people are going into debt right now because prices are rising so drastically. We need to help people get more financially savvy so over the next couple of weeks/months depending on how much time I get to work on this, I'm going to develop some guides and resources for different demographics. Included will be the following:

- Finance Fundamentals - geared towards younger people starting their first jobs or starting to make good money

- Second Act Individuals - This will talk about Social Security, retirement, estate planning, etc.

There will be others, but I will start with these.

Additionally, I'll include two links to some portfolios I've been working on. One being a dividend income portfolio, and one an all-weather portfolio (one designed to have decent average performance, regardless of the economy and the market).

I'm also in the very early stages of creating a curriculum for high schools so they start teaching personal finance to students. I'm astounded that this isn't a requirement, but only a small percentage of high schools around the country require a finance class before graduation.

If you have any questions, comments, or concerns about any of this, please let me know!