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When, or if, you should stop investing in stocks is a personal decision that will vary from person to person. The exact answer depends on a variety of factors, from your age to your health status to your own personal risk tolerance.

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However, while the final answer will vary from investor to investor, the questions you should ask to determine at what age you should not be in the stock market remain the same. Here are some important considerations along with specific suggestions to consider when making that decision for yourself.

General advice: Reduce risk as you retire

Over the long term, stocks are one of the best investments for capital gains. On average, US stock markets return about 10% annually, and there has never been a time when the S&P 500 actually lost money over a 20-year period.

However, on a day-to-day basis, stocks can be extremely volatile and bear markets can be devastating. That 10% average annual return figure can actually be a bit deceiving, as bear markets – where major indexes fall by at least 20% – occur regularly every four to five years, on average.

If you are young, taking these two things together is actually positive. Over the long term, stocks have historically bounced back from sales, and large market drops are actually buying opportunities. But if you retire at age 70, you won’t have time to recover from bad market times. If your portfolio is 100% stocks and you experience a bear market, that 20% drop would require a 25% recovery.

At this point the question becomes whether you should stop investing in stocks altogether or simply reduce your exposure – and that depends on your personal financial characteristics.

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overall health

If you retire due to poor health, now is a good time to consider eliminating your stock allocation. As you age, your health expenses will likely increase dramatically, and you will need to adjust your income and capital to pay those expenses.

If you have all your money in stocks and face a 10% or 20% — or more — drop, you’re more likely to fall short of covering your health costs.

Insurance coverage

If you have adequate insurance coverage, you may be able to maintain an allocation for stocks. If your insurance is good enough to cover your retirement health care expenses, that relieves a lot of the burden on your portfolio to generate income, or be sold when it’s not needed.

If you can otherwise afford your lifestyle, it might make sense to keep some money in stocks to help you combat rising costs due to inflation.

Income needed

If you have a significant pension, 401(k) or other source of retirement income, you can usually keep some of your portfolio in stocks, even at an advanced age. By covering your income needs, your ongoing stock allocation can still help increase the value of your portfolio. And with a larger portfolio down the road, your assets can one day generate more income for you.

risk tolerance

When you first start investing in stocks, one of the most important things to consider is your risk tolerance. But as you get closer to retirement, your risk tolerance plays less of a role in determining your allocation.

That’s because while your pet can handle a big drop in the stock market, your retirement portfolio usually can’t. In other words, if you can emotionally withstand a large drop in your portfolio value, for the reasons described above, the loss of your income stream and/or financial well-being in retirement may never recover.

Even if you are mentally prepared to deal with a bear market, it is too big a risk to take.

Final Thoughts: Always a reason to consider at least a small allocation to stocks

For a long time, the conventional wisdom among financial advisors was that investors heading into retirement should sell their stocks and buy more conservative, income-producing investments like CDs or bonds. While this can reduce portfolio risk for investors, it faces another risk – that of running out of money.

Because inflation robs your portfolio of value over time, investing 100% of your money in low-yielding, conservative investments can actually give you a negative real return (calculated by subtracting the rate of inflation from your rate of return). This is especially true in 2022 and 2023, when inflation rates will reach their highest levels in more than 40 years. Although stocks can be risky on a day-to-day basis, they can help counter this risk of inflation that erodes the value of your money.

Another thing to consider is that even if you are 70 years old, you may live another 20, 25 or more years. With this long runway, holding stocks becomes much less risky and can actually help fund your portfolio long into your retirement.

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