For many Americans, decades of steady growth in a 401(k) balance can reinforce confidence that retirement planning is on track.
But a rising account balance does not necessarily mean a portfolio is positioned to generate reliable income for retirees.
Fidelity’s first-quarter 2026 retirement analysis indicates that many savers near retirement hold portfolios skewed toward growth rather than income generation.
The data comes during a period of heightened market turbulence that has pressured retirement accounts, regardless of age group or account type.
Half of older Fidelity 401(k) participants overweight in stocks
Half of Fidelity 401(k) participants aged 70 and older hold more equities than the firm recommends, according to its first quarter 2026 retirement analysis.
That rate is the highest of any age group and sits well above the 34% average across all 401(k) participants, the report confirmed.
Among savers aged 65 to 69, close to four in 10 also carry stock allocations above the levels Fidelity considers appropriate, the analysis indicated.
A 70-year-old retiree whose portfolio mirrors the Fidelity Freedom 2020 Fund would hold approximately 50% of total assets in equities, the firm noted.
Carrying a significantly higher stock percentage means accepting more market risk than the fund’s design considers suitable for that particular retirement stage.
Only 5.7% of participants adjusted their asset allocation during the first quarter of 2026, even as market volatility shifted portfolio weightings, Fidelity stated.
Market downturn in early retirement can permanently shrink savings
The central danger of carrying a stock-heavy portfolio near retirement has a name that most savers never encounter until the damage is already done.
Sequence-of-returns risk occurs when retirees withdraw from a declining portfolio in the early years after they stop working, permanently locking in losses, according to Fidelity’s research.
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The research illustrates the risk with a scenario involving two hypothetical retirees who each start with $1 million and withdraw $50,000 every year.
The retiree who encounters strong returns early and a bear market later finishes with more than $3 million after 30 years of withdrawals.
The retiree who faces negative returns first and then recovers sees the entire portfolio depleted by year 27, according to Fidelity’s data.
Those forced withdrawals require selling shares at depressed prices, which permanently reduces the capital available to benefit from any eventual market rebound.
This dynamic can permanently reduce how long a portfolio lasts, certified financial planner Mike Casey, founder and president of AE Advisors in Alexandria, Virginia, told CNBC.
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Social Security covers only a fraction of the income retirees require
One reason equity-heavy allocations persist into retirement is that many savers remain focused on portfolio growth without planning for sustainable income generation.
Fidelity estimates that retirees should aim to replace up to 80% of their pre-retirement income to maintain their current standard of living.
Social Security may replace only about 35% of pre-retirement income for a worker earning around $50,000, with the share shrinking at higher incomes, leaving personal savings to fill the gap, according to Fidelity.
With traditional pensions continuing to vanish across the private sector, investment portfolios have become the primary source of supplemental retirement income for most Americans.
Morningstar’s 2026 retirement income research pegs the baseline safe withdrawal rate at 3.9%, slightly below the long-cited 4% guideline used by many financial planners.
Portfolios with heavier equity concentrations generally support lower safe withdrawal rates because additional volatility amplifies sequence-of-returns exposure, the report indicated.
Retirement portfolios need an income layer, not just a growth engine
Retirement finances should be built on a three-part foundation balancing short-term reserves, guaranteed income sources, and growth-oriented investment accounts, according to Fidelity’s published framework.
Short-term savings cover immediate expenses, income from Social Security or annuities covers essentials, and investment portfolios fund discretionary spending and support long-term growth.
The firm recommends withdrawing no more than 4% to 5% of total portfolio value in the first year of retirement, its analysis noted.
Adjustments for inflation in each subsequent year are part of the approach, which assumes a 30-year or longer retirement for someone who stops working at age 65.
Financial Advisor Jared Chase highlighted a different dimension of the risk in an interview with Kiplinger.
A large retirement risk for many affluent households isn’t volatility, it’s becoming too conservative too early and failing to maintain purchasing power.
That tension between protecting capital and maintaining growth potential is precisely what makes the final years before retirement so consequential for portfolio decisions.
A retiree whose essential expenses are covered and who holds substantial liquid reserves may reasonably maintain a larger equity position, Mike Shamrell, vice president of thought leadership at Fidelity, explained to Kiplinger.
Address a stock-heavy portfolio before it becomes a problem
For savers whose equity exposure has drifted above their target, Fidelity suggests rebalancing the portfolio back to the planned mix of stocks and bonds, Kiplinger reported.
Using the glide path of an age-appropriate target-date fund as a benchmark can help determine where stock and bond weightings belong, Shamrell recommended to Kiplinger.
Holding one to two years of expenses in cash can reduce pressure to sell equities during a downturn, certified financial planner Matthew McKay, director of investments at Briaud Financial Advisors, told CNBC.
Charles Schwab has recommended that retirees keep two to four years of expenses in liquid, short-term investments as a buffer against steep declines.
“Don’t look at your portfolio as if the stock market never loses,” Jason Grover, a financial planning specialist at Grover Financial Services, told Kiplinger.
Fidelity’s data leaves one question for every near-retiree: Does your portfolio deliver sustainable retirement income, or is it still structured for the accumulation phase?
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