Source: Squared Away Blog


The Financial Security Project (of Boston College) references the ongoing risk aversion that many investors still seem to laboring under.

They note:

Mutual fund investors poured some $17 billion into domestic equity funds in January, reversing 2012’s trend, according to the Investment Company Institute (ICI), an industry trade group.

But it’s too early to declare that fund investors have fully recovered from the 2008 market collapse, even as the bullish S&P500 stock market index flirts with its 1,565 all-time high reached on October 9, 2007.

This is something we see in the office all the time, and it is classified as a financial behavioral issue: Boomers have not not gotten back into equities, as they age they continually pare back their risk profiles.

I am not sure what the solution to the behavioral issue will be, but I suspect a lot of people who previously thought of themselves as “comfortable” might be in danger of outliving their monies.

These are strange days . . .

Category: Digital Media, Investing, Psychology

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

41 Responses to “Are Boomers Too Cautious About Stocks?”

  1. BennyProfane says:

    At this point, I’ll bet it’s going to be a scorpion and frog thing. A lot of Boomers are being told that equities are necessary, and are rightfully skeptical of the casino, but, have to jump in just to preserve capital, because bond funds are now losing money. But halfway across that stream, I wouldn’t be surprised at all……….

    It’s just a small minority of Boomers, anyway. Half have nothing saved, and maybe 10-20% of the other half have any kind of money worth worrying about.

  2. Super-Anon says:

    When people ask me for retirement advice these days I tell them:

    “Cultivate and ideology that allows you cope with being poor.”

  3. AHodge says:

    talking returns–why talk future tense
    they already left prob more that half this bull market cyclical upturn on the table

    talking risk and understanding– it makes sense
    where they rightly think i have little idea whats going on
    old fundamental investing is dangerous
    and i am the last one to know in the trading information food chain
    but if stock market keeps going up
    the economy news starts to sound bette rand we delink from europe
    then later we finally get to relative economic “good times”
    no reason they cant come in for the last half, even drive the rally there
    then get hosed in the big downturn?
    some anyway
    i think there has been some learning going on

    but thoughts about making their retirement last now, or saying
    i need to make more returns
    is not that much on their minds, hasnt been reduced, its always there
    in any case
    1 you cant make any more than the market will give you
    2 the more the market goes up, the less extra they needfor retirement, if they have any stock
    even if they dont have “enough”

  4. techy says:

    Thats why we need a strong social security for people who have paid into it, where benefits should be inflation indexed and should be enough to cover basic living expenses.

    We need to decouple the retirement from having enough capital. Because zirp is a necessity when inequality is high but it harms the retirees.

  5. bmz says:

    Super-Anon–Good idea–I’m vacationing in India this spring.

  6. SteveC says:

    For many, its like losing a boat load of money at a casino, then having the dealer smile at you and say “how about one more try. Trust us…” Small investors should use asset allocation and dollar cost averaging. Look at your statement a couple times per year. Otherwise, they’ll get fleeced again.

  7. smartass says:

    you must not understand social security and its taxation. I have many retired couples making 30-35k per year from social security combined. Not that it is huge but did I mention it is tax free and they could make another/take ira dist/earn interest/ pension of another 12-20k per year depending on deductions and that is tax free also. How much did these people pay in to get this benefit? This is a steal!

    So this same person has 500k – 1mil in the bank/retirement accounts, no debt lives comfortable on social security. Even with crappy rates they are 2-3% on their money with little to no stocks. They don’t need to take the extra risk.

    Now it would be interesting to see this data divided in quartiles for total assets and how their assets are divided then.

  8. danm says:

    IMO, if you have to drastically increase your equities to make it work, you probably should not be retiring.

    Many people WILL outlive their savings… either they get clobbered by the impact of volatility or they lose purchasing power. And I don’t think increasing equities is the solution. The solution is to think of retiring with a part-time job.

  9. danm says:

    Capital markets are too big for the amount of GDP… so the answer is not to dream of a bigger portfolio but to get a slice of that GDP.

  10. BennyProfane says:


    Since when is SS tax free?

  11. carleric says:

    Speaking only for ourselves, as my wife and I age, we have certainly pared back our equity exposure despite Benny’s attempt to force us into the market…..the game is rigged but how long can that go on?

    Of course as long as the “smart guys” at the Fed think they know the answer they will continue to try to pump up asset prices in a vain and futile hope they can finally get it right. I think 30-40% exposure is more than enough and even that requires daily supplications. One might think after a lifetime of not getting it right they would learn but that is also a vain hope.

  12. rd says:

    The graph is a perception/opinion graph about what risk people ar ethinking they are willing to take. It does not provide any infdormation on how much risk they are actually taking. Probably many of the people they are asking, don’t really understand risk statistics in the context of the stock market or bond market. It appears that the people writing the article are using 80% equities as an acceptable risk threshold:

    ” There are other indications of lingering caution, though not outright fear. The share of fund investors who have 80 percent or more of their portfolios in the stock market is far lower than it was a decade ago, and fund investors are also diversifying more.

    Again, this is most pronounced among 401(k) investors and older investors approaching or in retirement. Since 2000, the share of baby boomers investing more than 80 percent in stocks in their retirement plans has dropped in half, to about 25 percent for 50-somethings and 21 percent for 60-somethings in 2011, the most recent data available.”

    These authors somehow seem to be thinking that the portfolio asset allocations many people had in the boom are optimum. Is anybody in the financial sector seriously thinking most baby boomers should have 80%+ equities in their portfolio at this time? Their data point indicating that over 20% of 50+ and 60+ people have more than 80% equities in their portfolio should be concerning us at this point, especially considering that markets have doubled over the past 4 years and several fairly reliable valuation indicators (CAPE, Q etc.) are indicating that we are in the upper range of historic valuations. these people may really be taking on too much risk.

    If they were presenting data indicating that more than 25% of 50+ people had less than 40% equities in their portfolio, then I could see an argument for being over-cautious but that data is not provided. At this time, it appears that the authors ar esimply pushing for the small investor to return to the fully invested profiles they had in 2000 and 2007, presumably so they can suffer the same fate as then.

  13. USSofA says:

    How many boomers got burned in the dot com bubble and said they were done with the stock market. They turned to something more concrete to save for retirement…housing. Ouch again. There is only one safe place left, good old US Treasuries. Ouch again to the Bernank. From now on when a boomer dies, check the mattress first.

  14. VennData says:

    If only Santorum had won, then I’d feel comfortable investing, with that Socialist Obama, who knows? You would have lost everything if you would have invested when he took office, trust me.

    Stay out of stocks. If you buy stocks, you’re tacitly supporting Obama and his socialism. Just look at Europe! Just sit tight and wait, don’t support anything Obama says. You don’t want Obama to get credit for anything do you? Except Bengazi.

    Oh I miss Bush.

  15. Nice post. :)

    Just pulling your chain Barry.



    BR: What is the original source of the chart? I thought that was what I was linking to . . .

  16. techy says:

    smartass: Most people who are in their 50s that I know, will be dependent on SS for most of their living expense, but I know one another plan they are counting on, work till death.

    Another thing, I dont think it is unfair to pay better benefits to SS recipients, otherwise they will starve because of ZIRP. They planned for min 5% return from safe investment, not 1%. The inequlity caused by offshoring and automation can be fought only with massive stimulus spending or zirp QE(inflation to remove inequality).

  17. jritzema says:

    An interesting idea that I have heard presented (probably because I work for a firm that produced a paper on it, although we offer no product related to it) was combining more income generating equity exposure in boomer portfolios with longevity insurance. Longevity insurance is a single premium policy that pays out annually if you live beyond your life expectancy. It is designed to address the concern danm raises on outliving your savings while attempting to generate higher return with the savings you have. It is interesting to think about but is currently only a thought exercise as I know no one doing it.

  18. S Brennan says:

    Well, I think your point is that this time, “it is really different”, maybe too much flesh was taken by financial thieves, or perhaps Obama’s Hoover-esque response to further enrich the financial fraudsters in an effort to have them “trickle down” taxpayer money given to them by Timmy Giethner has failed as no other policy in modern. Whether the actual thievery, or the current administrations support of perpetrators, the situation does appear bleaker than we’ve seen in the post WWII world.

    Not by choice, few of the back-end boomers will ever see retirement, they’ll just be un-employed workers forced to undercut the wages of younger workers…and will be able to do so because they have health insurance through Medicare. People forget, or never got the memo, getting people to retire raises wages of workers.

    Many of my professional friends lost everything…I mean everything. Right now, keeping themselves off the street is their only worry, the idea of “investing” is a form of black humor. I would presume conservative “investors” are the lucky ones who made it through the storm battered, but largely intact. Perhaps they will timidly go in and miss most of the up and catch a substantial portion of the down, but they know they are the last marks standing in DC’s/Wall-Street’s rape of America. They have every right to be cautious.

    But rather than mourn the loss of policies that led to unprecedented prosperity, let us celebrate our return to the policies of the Guilded Age, it’s astounding poverty and the cruelty of 19th century in general. Don’t worry, be happy, we don’t have a free press, so we won’t have to worry about reports like “Between 1890 and 1917, over 230,000 railroad employees were killed and over 2 million injured.” all that will swept under the bipartisan rug.

    At his point only military coup could have a chance of undoing the harm caused by the policies of the last thirty five years. And it is how Rome lost it’s republic, but while it ended the endemic corruption that was the Republic in it final throes…it also produced Caligula…so there is that to consider.

  19. BR. I enjoy your blog and was just giving you a hard time. All for fun. The link in my earlier comment was our original post and you have the correct original source, i.e., Squared Away Blog.


  20. kalum0 says:

    My ss benefit is most definitely not tax free.

  21. Julia Chestnut says:

    But wait – wasn’t the standard investment advice for the boomers’ entire lives that you pare back risk as you near retirement? You take risks while you are actively adding to your portfolio while younger, and therefore are still buying dips when they hit your portfolio, but then you cut back to principle conservation when you hit retirement age and have a nest egg assembled, right? I mean, no one handing out that advice counted on ZIRP for years and years on end. BUT teaching older dogs new tricks, when that was the standard wisdom drilled into them for decades, might not be all that easy.

    And remember what interest rates looked like during their peak earning years – if I were 62, I can see thinking that this past few years were a wild outlier, rather than the high interest rate and obvious inflation years.

    And that’s on top of the whole “Burn me once, shame on you” mentality that I would expect people to have at this point. I literally know people who came into the crash fully exposed, having recovered from the crash mentally, and got their portfolio halved AGAIN. There just hasn’t been a safe harbor for awhile now, I don’t find it all that surprising that boomers are looking outside equities for something that can keep them afloat.

  22. smartass says:


    The way ss works is they only count 1/2 of your benefits, so that married couple getting 35k in benefits only has 17.5k in income subtract standard deduction and personal exemptions and you have no income left. If you itemize then you can earn more with no tax.

    Like everything there are many catches..they will tax your benefits @ 85% if your income is over 44k joint 34k single

    A paticular couple I work with retired last year. While they were working we were withholding 10% from her IRA distributions. In dec I phoned their CPA let them know they are both retired 36k per year in ss combined another 8k per year from the IRA. I wanted all of us to be on the same page and he confirmed this couple could earn roughly 51-52k per year before any tax would kick in.

    Needless to say if you are a high income earner then your income will not be tax free but it will still help lower your marginal tax rate.

  23. DeDude says:


    The average monthly SS check is $1230 – with the 50% spousal benefits it gets to $1845 for a couple (with one being home-maker). That can cover a low living standard, although if anybody gets sick (and old people do) it will be a struggle. Many people are (by definition) below the average and if they are alone it can be extremely difficult to live and get health care on their SS alone. Now that is not the type of people who belong to your clientele since they simply cannot afford professional services (even if they need them).

    However, the people you are dealing with have paid close to maximum into the SS system for prolonged periods of time – and when you calculate what they paid and what they get back out they are not getting such a hot deal (often would have gotten more back if the money had been placed in regular treasuries). That is why we, in all fairness, need to fix SS by putting a 1% SS tax on all income (including investment and inheritance income) in excess of the limit for normal SS taxes.

  24. DeDude says:

    PS: The sad part about this discussion of SS benefit cuts is that the system will turn out to be fully funded for everybody if we just leave it alone for the next decade. We have had an epidemic of obesity for more than a decade now and it is getting worse. Obesity causes diabetes, hypertension and dyslipidemia. Those are all things that drastically cut life expectancy. So the average lifespan is about to drop. However, the SS administration builds its projections on current trends in lifespan not on the drop that we all know is about to begin. Even with the current projections they tell us that the system will suffer a few decades of 70-99% payments of promised benefits, then it will be back in black and produce a surplus. What do you think would happen if they used the lifespan predictions that include our knowledge of the effects of obesity. No, cannot do that – because then we would have no excuse for punishing the poor – and cutting taxes on the rich after surpluses magically appears (you know in a “nobody could have predicted” kind of way).

  25. evelyn says:

    As retirement savings have turned away from pensions and toward 401K type investments, surely it is with widespread understanding among the financial elite that former pensioners don’t know how to manage their own investments. What an opportunity to make money! We are ready marks waiting to be trolled, and annoying doesn’t begin to express the problem with the setup.

  26. Bridget says:

    Re: DeDude and obesity “So the average lifespan is about to drop.”

    Maybe, but any “savings” in Social Security will likely be more than offset by the cost to Medicare and Medicaid and Obamacare of treating diabetes, hypertension, and many other consequences of obesity.

  27. slowkarma says:

    A lot of people who “did the right thing” — saved money, kept track of what they would have in retirement with conservative projections — are being screwed by the artificially low-interest environment being forced by the Fed; and will probably be screwed again on the back end of this thing, when the washout comes. In any case, if you’re 73 years old and retired at 67, before the crash, having spent your life doing the right thing, buying equities is not really a risk — it’s a requirement. For many of these people, retirement was carefully calculated: x amount from social security, y amount from a company pension, z amount from investments. But even the most conservative projections ten years ago didn’t foresee a half-decade or more of virtually no returns on government bonds; and these carefully constructed retirements are going in the toilet, with people spending savings instead of interest. So, with the need for some return, and with the idea that an inflation washout is probably coming, people go to large companies with substantial dividends, trying to get both a bit of return and a bit of cover if inflation moves up. You have to ask: is 3M really more risky than government bonds that return nothing?

  28. call me ahab says:

    “work till death.”

    seems less boring than sitting around playing checkers

  29. Old Rob says:

    ……… I suspect a lot of people who previously thought of themselves as “comfortable” might be in danger of outliving their monies.

    As someone who is older than the ‘Boomers’, I believe there will be more of a radical change in living standards than Boomers outliving their investments. One can always move into trailer parks and other small scale housing. Condos will be out of the question because of the upkeep fees. Moving down is not the greatest issue; it’s the state of recognition. Boomers will be noticeably absent from any ‘so-called’ recovery.

  30. constantnormal says:

    “Are Boomers Too Cautious About Stocks?”

    If we are using history as our guide, then yes. But then consider these nuggets of experience …

    The boomers were pitched IRAs and then 401-Ks, with the story that “in retirement you will spend less, so the money that comes out of these plans will be taxed less” … along with the fable of using their homes as their “investments” …

    And indeed, the trend in tax rates has been ever-lower, but now no thinking person believes they can continue to decline … meanwhile health care costs have exploded, and employers have abandoned pensions, using 401-Ks as an excuse for doing so, and housing has punctured the myth of ever-increasing home values, leaving the typical boomer radically out of their depth, with their only real expectation being that every aspect of their existence is going to get incredibly expensive, and that the “system” is out to get them, with corruption throughout our society, and the top of the economic food chain merrily feeding on the shrimp struggling to hang on.

    This is perception, and may or may not represent actual reality. But it does serve to crank uncertainty ‘way up there, and make boomers leery of assuming any risk that they don’t have to … they think that there is already to much uncertainty and risk in their lives, why take on more?

    And truth be told, it is VERY difficult to see much of a rosy future ahead, with no evidence whatsoever of any corrective actions being taken in our society, some good evidence that things are going to get even more uncertain, and emerging nations elbow their way into the developed nation club, and putting immense pressure on resources and the environment (the Grantham argument).

    History is a pretty poor guide at this point, for the formation of any expectations of the future, and the boomers have run outa time … their future is just about upon them … being paralyzed with conservative fears is a quite understandable thing for them to be experiencing …

  31. Moopheus says:

    I agree with Julia–in Ye Olde Dayes of pensions and interest on savings, the idea was to back off risk as you got to the end of your prime earning years. Why risk a big loss when you couldn’t make it up? The fact that many have insufficient savings and can no longer no longer count on safe investments to produce income is not a failing of boomers (well, not entirely), but of the crooks who swindled us out of these things.

  32. danm says:

    One can always move into trailer parks and other small scale housing. Condos will be out of the question because of the upkeep fees
    If you don’t have access to health care… why stay close to the city… the boodocks are way cheaper.

  33. wally says:

    “Too” cautious?

    The Cult of Equities continues.

  34. skier5150 says:

    So Boomer me turns 50 for Dot Bomb and the Bush offshoring & collapse, worked 4 years of his 8, none with benefits, started having medical issues, I did hold onto my house (oops), then back to a real job since 2009 (private mfg, not govt at all). But wages have stalled since 1980 (cept for the 90′s) and we are called Communist for noticing you get less pay than your parents got when the GDP percapita was half what it is now. My big decade for saving $ is gone.

    I am hanging OK, mainly due to not having a family, but retirement will only mean getting off the 50+hr treadmill, and working contracts. I think it’ll calm down one way or another in 5 years or so, but I’ll live under a bridge before I give the crooked bastards running the Big Rigged Casino a godamn nickel.

  35. Pantmaker says:

    “Too cautious”? Who knows…but they are cautious…and they should be…it’s their retirement money. The sad irony is boomers are loaded to the gills with bond funds (the “conservative choice” on their 401k home page) because they have been so conditioned to believe the ridiculous notion that they must be invested in some combination of stocks and bonds at all times (various rotation memes). Stocks and bonds are going to mean revert all over a lot of boomer portfolios. Waiting for better entries on both would be prudent.

  36. Bridget says:

    OK. Just for the sake of stirring up some s**t. I ask this.

    I am a boomer who had 3 kids. Quit work and put 110% into the raising of them. The vacations we didn’t take, the clothes I didn’t buy for them, the nails and hair I did myself, the items I sewed, the gardens we planted, the vegetables we put up, the meals we didn’t eat out, the old vehicles we drove, the beans and rice we ate, etc. etc. Actually loved every minute of it. Made good later in life. Got them all well educated (actually began saving for that when they were born) andgot them embarked on good careers and building relationships with like minded significant others.

    Compare and contrast to some of my Boomer cohorts, the first generation to eschew the bearing and raising of children in favor of pursuing their own happiness. Or whatever.

    Why, pray tell, should our carefully raised children, into whom we poured every bit of resources we had: financial, emotional, mental, physical, be basically enslaved to the support of those who were really too busy to either have children of their own or to do the very best job they could with the ones with whom they were blessed?

    Just askin’.

  37. Bridget says:

    Eek! I definitely had one glass of wine too many. My apologies for the comment at 9:46. May it stay in moderation purgatory.

  38. Antifriction says:

    Boomer here…

    I have chosen to eschew the market for several other “investments”

    Before 2008 I was planning to sell my small business an invest in stocks and bonds in retirement..

    Business is good and I’ve asked my youngest to join me.. I am now investing in inventory and expansion..

    In addition I am actively seeking other small cash generating business’ to purchase…

    Do I trust myself and my kids……… Or a CEO wearing a $5000 suit and a great tan……

    Hmmmmmmm ……. I’ll take what’s behind door #1

  39. number2son says:

    Most people who are in their 50s that I know, will be dependent on SS for most of their living expense, but I know one another plan they are counting on, work till death.

    Same here. That includes me and my wife, a public school teacher who has had her benefits pulled out from under her.

    My strategy, and hers, is to invest equally in exercise and healthy living. We know that we both need to stay healthy and fit in order to work into our 70′s. The upside is we continue to have fantastic sex. So what the hell – when you’ve got lemons, make lemonade. ;)

  40. DeDude says:


    Medicare/Medicaid is a whole other can of worms that will not be solved until “we the people” figure out that the French system produce better care for about half the price – and that maybe we should put down the “freedom fries” and learn something from that simple fact.

  41. phillips49 says:

    Interesting phrase “ financial behavior issue”. Examination of the data presented shows that reduced risk is not isolated to the “boomers”. The sample is inclusive of investors 65+ as of 2001 and 2007. They would have birth dates between 1936 and 1942 which are pre-boomer or the “great Generation”. I don’t understand why it would be a surprise to anyone that the 65+ bunch reduces risk and focuses on return of capital as opposed to return on capital. They need liquidity and have no time to recover from events such as the crash of ’87, the dot com bust, the financial crisis or the flash crash…duh.
    You are right, many will outlive their monies. Many have little or no savings for retirement. Many had been betting on appreciation of real estate for retirement money and we all know how that went.