What’s Inside This Guide

The Big Picture: Why This Question Matters

I’ve spent years advising retirees, and the single most common question I hear is: “Should I just get out of the stock market now that I’m 70?” It sounds logical — you’re older, you need safety, you can’t afford to lose money. But here’s the truth that catches most people off guard: exiting completely might be the riskiest move you can make.

Think about it. At 70, you could easily live another 20 or 30 years. If you pull everything out and put it in a savings account earning 1%, inflation will quietly eat away your purchasing power. I’ve seen retirees who cashed out in 2009 out of fear, only to watch the market double over the next decade while their CDs barely budged. That’s not safety — that’s a slow leak.

The real question isn’t whether to get out, but how to stay in the right way. And that’s what we’ll unpack here.

Common Myths About Old Age and Investing

Let’s clear up some noise first. I hear these myths all the time, and they’re dangerous.

Myth #1: “Stocks are too risky for a 70-year-old.”
Risk isn’t binary. A diversified portfolio with a mix of stocks and bonds actually reduces overall volatility. The real risk is outliving your money — and that requires growth.
Myth #2: “You should have zero stocks by retirement.”
That worked in the 1950s when pensions covered everything. Today, most retirees need their nest egg to last 25+ years. I’d argue a 70-year-old without any stocks is taking a bigger gamble on inflation.
Myth #3: “Bonds are completely safe.”
Bonds can lose value when interest rates rise. In 2022, many bond funds dropped 10-15%. Nothing is 100% safe, so we need a strategy, not an escape.

What’s the Real Risk? Sequence of Returns vs. Longevity

Two threats matter most at age 70: sequence-of-returns risk and longevity risk.

Sequence-of-returns risk is the danger of a market crash hitting right when you start withdrawing. If you pull money out after a 30% drop, you lock in losses and dramatically shorten your portfolio’s life. This is why many advisors suggest having 1-2 years of expenses in cash or short-term bonds — so you never have to sell stocks during a downturn.

Longevity risk is the opposite: living so long that your money runs out. A 70-year-old woman in good health has about a 50% chance of living to 90. That’s 20 years of withdrawals. If your portfolio earns nothing after inflation, you’re guaranteed to deplete it. The only way to fight that is to keep some growth engines running.

So the real answer to “should I get out?” is no, but you must manage the sequence risk carefully. I call it the “guardrails approach.”

A Better Approach: Don’t Exit, Adapt

Instead of exiting, redesign your portfolio for safety and income. Here are three concrete ways to do that.

Create a Bond Ladder for Income

A bond ladder means buying individual bonds or CDs that mature in different years — say 1, 2, 3, 4, and 5 years out. As each bond matures, you get cash to spend or reinvest. This provides predictable income without touching stocks.

I built a 5-year ladder for my mother two years ago. She gets around 4.5% on those bonds, and it covers her annual living expenses. Meanwhile, her stock portion sits untouched, growing for the long haul.

Keep a Growth Core for Inflation Protection

You need some stocks to outpace inflation. I recommend a mix of 20–40% in a broad market index fund like VTI (Vanguard Total Stock Market) or an S&P 500 fund. Historically, these return 8-10% annually over long periods. Even if you only keep 30% in stocks, that growth can double your portfolio in 10 years by retirement math.

Use Dividend Stocks for Cash Flow

Dividend-paying stocks — think Johnson & Johnson, Procter & Gamble, Coca-Cola — provide regular cash payments. At 70, you can spend those dividends instead of selling shares. The key is to choose companies with a long history of raising dividends. I’ve seen clients who get 3-4% yield from a diversified dividend portfolio, and those payments often grow faster than inflation.

How Much Should You Keep in Stocks? A Simple Rule of Thumb

Here’s a guideline I’ve used for years: start with 110 minus your age, then adjust for your risk tolerance.

AgeStock Allocation (Rule of 110)Conservative VersionAggressive Version
7040% stocks25% stocks50% stocks
7535% stocks20% stocks45% stocks

But these are just starting points. I always ask: Do you have a pension that covers basics? If yes, you can be more aggressive. Do you need the money in the next 3 years? Then keep that cash outside stocks. The point is to customize.

Real-Life Example: My Uncle John’s 70/30 Split

Let me tell you about Uncle John, a retired engineer who turned 70 last year. He came to me panicked after seeing a market dip. “Should I sell everything?” he asked. Instead, I helped him set up a portfolio that gave him confidence.

He had $600,000 in savings. We allocated:

  • $180,000 (30%) in a diversified bond ladder (Treasuries and high-grade corporate, maturing 1-5 years).
  • $120,000 (20%) in cash and short-term Treasuries (2 years of expenses).
  • $300,000 (50%) in stocks: $200K in a total market index fund and $100K in a dividend growth fund.

John now withdraws about $24,000 per year from the cash, replenishing it with bond maturities and dividends. His stock portion continues to grow. After the first year, his portfolio actually increased modestly despite the market volatility, because he never had to sell stocks low. He sleeps better knowing his near-term spending is safe.

The lesson: exiting the market isn’t the only way to feel safe. Structure is everything.

Tax Implications You Can’t Ignore

Taxes are a huge part of the decision. If you sell stocks in a taxable account after decades of appreciation, you’ll owe capital gains tax — potentially 15-20%. That could be a $50,000 tax bill you didn't plan for. On the other hand, selling within an IRA or 401(k) triggers ordinary income tax, which might push you into a higher bracket.

I always advise: don't make a move solely based on fear of the market; understand the tax cost first. Sometimes it’s better to hold stocks and borrow against them (via a margin loan from a broker) to get cash without selling. Or simply live off dividends and bonds until the market recovers.

Alternative Assets to Consider

Beyond stocks and bonds, there are other options that can provide income with lower correlation to the market:

  • Real Estate Investment Trusts (REITs): They pay high dividends (4-6%) and are tied to property, not stock sentiment. But they can be volatile.
  • Interval Funds or Non-Traded REITs: These are less liquid but offer higher yields. Only use if you can lock up money for 5 years.
  • Fixed Annuities: A fixed annuity guarantees a steady income stream for life. The downside? You lose control of the principal and may get low returns.
  • TIPS (Treasury Inflation-Protected Securities): Great for inflation protection. I often recommend TIPS for the portion you want to be truly safe.

I’m not a fan of complicated products like variable annuities with high fees. Stick to simple, low-cost investments.

Frequently Asked Questions

Can I afford a 20% stock market drop at age 70 without panicking?
If you have 2 years of living expenses in cash or bonds, a 20% drop is scary but not catastrophic. You simply don't sell stocks during the dip. I've seen clients who had that buffer actually buy more stocks when prices are low. The key is emotional discipline, which a good plan provides.
What if I need to withdraw money for a medical emergency when the market is down?
That's why the cash reserve exists. Keep an emergency fund separate from your portfolio — at least 6 months of expenses in a high-yield savings account. For major health costs, check if you can use Medicare savings or a health savings account (HSA) first.
Should I convert my IRA to a Roth IRA before reducing stock exposure?
Only if you're in a low tax bracket and have cash to pay the taxes. Converting means paying ordinary income tax on the amount converted. If the market is down, converting at a lower value can be a smart move because future growth becomes tax-free. But work with a CPA to model the numbers.
Is it better to buy dividend stocks or bond ETFs at 70?
Both have roles. Dividend stocks offer growth and rising income, but they're riskier. Bond ETFs provide stability but can dip with interest rates. I like individual bonds for the predictable maturity dates — you know exactly when you'll get your principal back. For dividends, focus on companies with 25+ years of increases, like those in the Dividend Aristocrats list.
What's the biggest mistake 70-year-olds make with their 401(k)?
Moving everything to a stable value fund or money market account. I see this constantly. They think it's safe, but they miss out on years of growth. A better move: keep 30-40% in a target-date fund that gradually reduces risk, or use a simple two-fund portfolio (total stock + total bond) with the percentages we discussed.