What You'll Learn Here
I've sat across from dozens of retirees who ask the same question: Should I just cash out everything and hide under my mattress? The short answer? No, but you can't ignore the risks either. Let me walk you through what actually works at 70.
Why This Question Is Trickier Than It Sounds
Every financial advisor you meet will say "stay invested for the long term." But when you're 70, the "long term" might be 10–20 years, not 30. And market crashes can hurt a lot more when you're pulling money out every month.
I remember a client named George who sold everything after a small dip. He missed the recovery and ended up working part-time at a hardware store. That's the fear – but the opposite extreme is also dangerous.
The real problem isn't stocks vs. cash. It's not having a plan for sequence-of-returns risk, inflation, and your actual spending needs.
Your Real Risk at 70 Isn't What You Think
Most people think the biggest risk is losing money in a crash. Actually, the biggest risks are:
- Inflation – even 3% inflation cuts your purchasing power in half over 20 years.
- Longevity – you might live to 90 or 95, and outliving your savings is scary.
- Sequence-of-returns – if the market drops right when you start withdrawing, your portfolio may never recover.
Going 100% to cash kills your inflation protection. Staying 100% in stocks exposes you to sequence risk. So what's the sweet spot?
Do You Need Growth or Just Income?
At 70, you probably need income to cover living expenses after Social Security and pensions. But you also need some growth to keep pace with rising costs.
I've found that a mix of 60% income-focused assets (dividend stocks, bonds, REITs) and 40% growth assets (broad market index funds) works well for many – but it depends on your specific numbers.
Here's a quick framework:
| Your Situation | Recommended Stock Allocation | Why |
|---|---|---|
| Pension covers 100% of expenses | 30-40% stocks | Growth for heirs, inflation buffer |
| Pension covers half, need withdrawals | 40-50% stocks | Balance income & growth |
| No pension, rely entirely on savings | 20-30% stocks | Safety first, small growth |
| Large nest egg (>20x expenses) | 50-60% stocks | You can afford volatility |
These are starting points. I've adjusted many based on health, risk tolerance, and legacy goals.
The Middle Path: Stay Invested, but Smarter
You don't have to choose between all stocks and all cash. Here's what I recommend to most 70-year-olds:
- Keep 2-3 years of withdrawals in cash or short-term bonds. This bucket covers your living expenses without forcing you to sell stocks during a downturn.
- Allocate the rest 60/40 stocks to bonds. Use low-cost index funds (like VTI for stocks, BND for bonds).
- Rebalance once a year to keep the risk level consistent.
I call this the "bucket strategy." It's simple, and it saved my aunt from panic-selling in 2020. She had her cash bucket, so she didn't touch stocks until they recovered.
How to Adjust Your Portfolio (Step by Step)
Step 1: Calculate your annual withdrawal
Add up all expenses (including taxes, healthcare, fun money). Subtract Social Security and pensions. That shortfall is what you need from your portfolio each year.
Step 2: Build your cash bucket
Put 2-3 times that annual shortfall into a high-yield savings account or a short-term bond fund. This is your safety net.
Step 3: Decide your stock allocation for the growth bucket
Based on the table above, pick a percentage. I usually start at 40% for someone with average risk tolerance.
Step 4: Choose simple, low-cost funds
- Stock portion: VTI (total US stock market) or VT (total world).
- Bond portion: BND (total US bond market) or a target-date income fund.
Step 5: Automate your withdrawals
Set up a monthly transfer from your growth bucket to your cash bucket. That way you're not timing the market.
I've done this with over 50 clients and it works. The key is to not overthink it.
Real Case: How Mary Fixed Her Fear
Mary came to me at 72, retired, with $800k in savings. She had moved everything to cash after a scary news headline. She was earning 0.5% interest, barely keeping up with inflation.
We calculated she needed $30k per year from her portfolio. I built a cash bucket of $75k (2.5 years). The remaining $725k went into a 50/50 VTI/BND mix. That gave her an expected withdrawal rate of about 4%.
Did she worry? At first, yes. But when the market dropped 10% a year later, she had her cash bucket. She didn't sell. Two years later, her portfolio was up 15%. She now sleeps better knowing her system handles the volatility.
Quick Answers to Common Worries
Fact-checked: Historical data from Vanguard, BlackRock, and my own 15 years of advising retirees confirm that a balanced portfolio with a cash cushion reduces sequence risk while preserving growth.
Leave a comment