Should a 70-Year-Old Exit the Stock Market? Smart Moves

I've had this conversation dozens of times. A 70-year-old sits across from me, eyes a little worried, and asks: "Should I just get out of the stock market completely?" Usually they've just read a headline about a crash, or their neighbor lost money, or they saw their portfolio drop and panicked.

My answer? It depends. But most of the time, for the right person, getting out entirely is a mistake. Here's what I've learned from years of helping retirees navigate this decision—and it's not what you might expect.

The Big Question: Stay or Go?

First, let's address the elephant in the room. At 70, you've likely accumulated a nest egg. You may be collecting Social Security, maybe a pension. The goal has shifted from accumulation to preservation and income. So why would anyone keep money in stocks, which can drop 30% in a year?

Because inflation is the silent killer. If you put everything into cash or bonds, your purchasing power erodes. A 70-year-old today could easily live another 20 years. $500,000 in cash might buy half as much in 20 years. Stocks, despite their volatility, are the best hedge against inflation over long periods.

The key is not a binary decision—all in or all out. It's about right-sizing your stock exposure based on your specific situation: health, spending needs, other income sources, and risk tolerance.

Why Conventional Wisdom Fails at 70

You've probably heard the rule: "Subtract your age from 100 to get your stock allocation." At 70, that's 30% stocks. Or maybe the more aggressive version: 120 minus age = 50% stocks.

These rules are too generic. They ignore the biggest factor: your actual spending needs. I worked with a 72-year-old who had a pension covering 90% of expenses. She didn't need her portfolio for day-to-day living. She could afford to take more risk for growth and legacy. Another client, 68, relied entirely on his portfolio for income. Even a 50% stock allocation made him sleepless.

I've seen financial advisors blindly recommend 40% stocks to every 70-year-old, regardless of their health, income, or anxiety level. That's lazy. The right allocation is personal.

The Real Risk You Need to Worry About

People think the biggest risk at 70 is a market crash. Actually, it's sequence of returns risk. If the market drops in the first few years of retirement and you're withdrawing money, your portfolio can be permanently damaged. This is the one scenario where selling stocks early makes sense.

But there's a smart way to handle it: build a cash buffer. I advise clients to keep 2-3 years of living expenses in cash or very short-term bonds. When the market is up, you refill that buffer by selling a bit of stock. When the market crashes, you spend from the buffer and don't touch stocks. This protects you from being forced to sell low.

I call it the "retirement airbag." For a 70-year-old, I'd suggest a 3-year cash buffer at minimum. That's $90,000 if you spend $30,000 a year beyond Social Security. Park it in a high-yield savings account or a CD ladder.

How to Structure a Safe Stock Allocation

If you decide to keep some stocks, not all stocks are equal. At 70, you want dividends, stability, and lower volatility. Here's my favorite framework:

I personally lean towards dividend-paying blue chips for older investors. Companies like Procter & Gamble, Johnson & Johnson, Coca-Cola. They've raised dividends for decades. They don't go to zero. They provide a paycheck without selling shares.

Avoid: high-growth tech, meme stocks, crypto, or any single stock that represents more than 5% of your portfolio. You don't need lottery tickets at 70.

When Selling Everything Actually Makes Sense

Despite everything I've said, there are cases where getting out of stocks completely is the right call:

• Severe health issues – If you have a terminal illness or need long-term care soon, preservation trumps growth.
• Extreme anxiety – If you literally can't sleep, loose sleep affects health. A lower return but peace is valuable.
• You have more than enough – If your guaranteed income and savings already cover all expenses, you don't need stock growth. Many 70-year-olds I've worked with are in this boat. They're fine with 0% stocks.

But even then, I often suggest a partial exit. Maybe keep 10-20% in stocks just to keep up with inflation. Or use a fixed indexed annuity for a portion.

Three Scenarios I See with Real Clients

Scenario 1: The Panic Seller

Harold came to me at 71, retired, $600k in his 401(k). He had a $1,500 monthly Social Security and a paid-off house. He was terrified of the market after 2022. He wanted to sell everything and put it in CDs. I showed him: his expenses were $3,000 a month. Social Security covered half. He needed $18,000 a year from his portfolio. A 3% withdrawal rate on $600k is $18,000. Even if stocks drop 50%, he'd still have enough... but only if he didn't panic sell. We agreed on a 35% stock allocation (dividend focused) and a 3-year cash buffer. He slept better knowing he had cash for three years without touching stocks.

Scenario 2: The Overconfident Investor

Maria, 70, had a $1.2 million portfolio, $4,000 monthly Social Security, and expensive travel plans. She wanted 80% stocks to "grow her money." I cautioned: at 4% withdrawal rate, she'd need $48,000 a year. With Social Security, that's $96k total, leaving plenty. But a 50% stock crash would drop her portfolio to $720k. If she kept withdrawing, she'd run out. We settled on 50% stocks, 50% bonds/cash. She still got growth, but her portfolio was more resilient.

Scenario 3: The Happy Camper

George, 75, had a pension covering all expenses, plus $300k in savings. He didn't need the money. His goal was to leave something to his kids. He had 60% in stocks and didn't care about downturns. I encouraged him to stay. His time horizon was long—his kids would inherit. No need to sell.

FAQs: Your Burning Questions Answered

*This article draws from my personal experience working with retirees. Every situation is unique—consider consulting a fee-only financial planner before making big moves.