Once You Hit 55, Is the Stock Market Still Your Best Bet?

If you're investing heavily in the twists and turns of the stock market in your 50s or 60s, you may be risking too much. It's time to consider playing the game differently.

By Barry H. Spencer, Registered Investment Adviser

published 27 February 2025

in Features

An older man uses a calculator and a laptop while sitting on his sofa.

(Image credit: Getty Images)

The dawning of another new year marks the time for financial pundits to make market predictions. But if you’re 55 or older and someone who usually listens to the media’s forecasts and strategies, it might be time to consider not following traditional investment management advice — primarily because it focuses on market returns.

For someone who's nearing retirement age, there’s not nearly as much time left to weather market dips. If you're in your 20s or 30s and have a 15- to 20-year time horizon, sure, don't worry about it. Just keep working and saving. But if you're 55 to 65, it’s wise to approach your investing differently. Look at the potential downside this way: At this late stage of your working life, could you really withstand a 30% to 50% hit in the market?

None of us can predict the future, least of all where the stock market is headed in the next few years. But if you want to take control of your money and gain more financial stability for your future, insulate your retirement income from economic and market turbulence. You can do that by setting retirement goals you can control. Make and follow through on your priorities so you’re not overly dependent on the market.

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Proper planning for retirement removes the necessity of stock market returns from the equation of meeting lifestyle needs. When setting your retirement goals, think about the following:

How much you will spend
How much you have exposed to stock market gains
How much you have protected from stock market losses
Tax planning: Whether you’ve taken the necessary steps to protect your money from tax increases due to income tax changes, capital gain rate adjustments and Medicare surcharge penalties

Enough already

The financial pontificators keep you boxed in to what the traditional money management industry wants you to focus on, namely investment returns, which are governed by the mood of the economic environment. They’re focused on risk tolerance, and the reality is that many people’s risk tolerance is governed more by the state of the economy and the market than it is by their ability to withstand the ups and downs. If everyone’s enthusiastic, you think you have all kinds of risk tolerance and you want the upside. But if the mood of the day is fearful and scared, you pull out of the market.

It is in the hope and anticipation of higher returns that people keep their investment accounts open and funded and keep adding to them. But while it is exciting if the value of your portfolio goes up another 10% or 20%, ask this: How beneficial will that actually be for you? Do you already have enough money to the point where another 10% or 20% won’t be life-changing?

If it’s not life-changing, then you need to think about this: What if the value of your account goes down 20%, 30% or even more? Could that be detrimental? Would you then not be able to retire? Might you be forced to adjust your lifestyle as a result? Could it mean not taking a trip you promised to take?

Perhaps you have saved so much that a 20% to 30% or more decrease in value wouldn’t force you to reduce your lifestyle or cancel travel plans. But would you get gut-punched, start to worry more, or start to lose sleep at the thought of the value dropping more? Is it possible that on your next trip, you would check your balance more frequently instead of just enjoying the view of the ocean?

If you said yes, it may mean you have too much exposure to the market if it goes down. And if you already have enough saved for retirement, why risk losing a lot of it by continuing to allocate a high percentage of your money in the stock market? Enough already. Stop the nonsense of potentially putting your hard-earned money in jeopardy when you are so close to the years when you can really start to enjoy it.

The emotional aspect of money loss

While the upside of market returns feels great, the downside tends to have a more severe emotion attached to it — the pain of loss and feeling of regret.

Think about it: If you have $1 million, how long did that take you to save that amount? And how much did you have to make to be able to save that much money?

Similarly, what if you were using 5% of $1 million to live on? (I’m not suggesting that a proper plan is to use 5% to live on; this is just to illustrate with round numbers.) Five percent of $1 million is $50,000. However, a 30% decline in value turns the $1 million into $700,000. How long did it take you to make that $300,000 that you just lost? And 5% of $700,000 is $35,000. That’s a $15,000 reduction in lifestyle in retirement. If that was the case, what would you feel you had to stop doing? Would that mean canceling travel plans? Could it mean not ordering from the other side of the menu, or not dining out at all?

Locking in your gains

Proper investing takes time to work. What you are hoping your investments do for you should not be a near-term expectation. In fact, if you’ve been invested for a while, you probably have made significant gains. Perhaps you should be considering your options to lock in those gains.

Not that investing is exactly like gambling, but in gambling (which I don’t do), when you start with $100 and win $100, what should you do? You should put in your pocket the $100 you came with and play with house money. Therefore, if over the years you’ve invested $500,000 and now have $1 million, using the same thinking, wouldn’t it make sense to pocket at least $500,000 in this scenario?

If you’ve played the game of investing over the span of your career and won, why keep playing the game the same way as if you haven’t won? It comes down to knowing when you have too much to lose and planning your retirement accordingly, without prioritizing market investments and returns.

Dan Dunkin contributed to this article.

The appearances in Kiplinger were obtained through a public relations program. Mr. Spencer received assistance from a public relations firm in preparing this piece for submission to Kiplinger.com. Kiplinger was not compensated in any way. Some media features/ appearances are advertisements paid for by Boomfish Wealth Group LLC to promote the business.

These materials are for informational purposes only. It is not intended to provide, and should not be relied on for, any tax or legal advice. Please consult a qualified professional before making decisions about your financial situation. The specific tax consequences of any investment or strategy will depend on your specific tax situation.

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Disclaimer

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

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Barry H. Spencer is a financial educator, author, speaker, industry thought leader, financial advisor, retirement planner and wealth manager who has appeared in Forbes, Kiplinger and other publications. He has also appeared on affiliates of NBC, ABC and CBS and was interviewed by Kevin Harrington, an original panelist on ABC’s hit show Shark Tank. Spencer’s latest books include Build Wealth Like a Shark, The Secret of Wealth With No Regrets and Retire Abundantly. As Creator/CEO of Wealth With No Regrets®, he and his team help financially successful people create a Retirement Built for Confidence™.