7 Signs You're Too Exposed to Stocks Near Retirement

Sign #1: You Don't Actually Know Your Stock Allocation

If someone asked you right now, 'What percentage of your retirement money is in stocks?' — could you answer? Most pre-retirees can't, because target-date funds and 401(k) menus hide the underlying allocation.

If you're 5-10 years from retirement and you're not sure, that itself is a sign. After a 15-year bull market, most 'balanced' portfolios are now 70-80% in equities — far more than they should be at this stage.

Sign #2: A 30% Drop Would Force You to Delay Retirement

Run this stress test: imagine the market drops 30% tomorrow. Would you still retire on your planned date, or would you have to work 2-5 more years?

If the answer is 'I'd have to keep working,' your plan is dependent on the market cooperating. That's not a plan — that's a wish.

Sign #3: You Haven't Rebalanced in 3+ Years

Bull markets quietly increase your stock allocation. A portfolio that was 60% stocks five years ago is probably 75%+ stocks today, simply because stocks outperformed bonds. Without rebalancing, your risk has crept up while you weren't looking.

Sign #4: You Have No Source of Guaranteed Income Beyond Social Security

If your only guaranteed monthly income in retirement will be Social Security (typically $2,000-$3,500/month), and everything else depends on selling investments, you are 100% exposed to market risk for the rest of your life.

Most retirees need $5,000-$8,000/month to live comfortably. The gap between Social Security and your needs is what financial planners call the 'income gap' — and filling it with market-dependent withdrawals is risky.

Sign #5: You Watch the Market Daily (And It Affects Your Mood)

Behavioral risk is real risk. If a bad market week ruins your weekend, you're more likely to sell at the bottom — locking in losses that are otherwise just on paper. The right portfolio for you is one you can actually stick with through a downturn.

Sign #6: Your Bonds Lost Money in 2022 and That Surprised You

2022 was a wake-up call: bonds dropped roughly 13% (their worst year in modern history) at the same time stocks fell. The classic 60/40 portfolio lost about 17%.

If you assumed bonds would protect you in a stock downturn and 2022 surprised you, your understanding of 'diversification' may need updating. True diversification in retirement often means adding non-correlated assets like fixed annuities, which cannot lose value to market movements.

Sign #7: Your Plan Assumes 7%+ Average Returns Forever

If your retirement projections assume 7-8% annual returns indefinitely, you may be planning for a best-case scenario rather than a realistic one. Most independent forecasts for the next decade are closer to 4-6%.

Worse, those projections rarely account for sequence-of-returns risk. Averaging 7% over 20 years is very different from averaging 7% with a 30% drop in year one.

What to Do If You Recognize These Signs

Recognizing the risk is the first step. The next is building a plan that doesn't require the market to cooperate. For most pre-retirees, that means three things: rebalance to an age-appropriate allocation, build a guaranteed income floor that covers essential expenses, and stress-test your plan against a major drop.

At ACM, our free 20-minute review walks through exactly this. We model your current allocation, run a sequence-of-returns stress test, and show you what a guaranteed income floor would look like for your specific situation.