{"id":9628,"date":"2026-06-29T00:38:41","date_gmt":"2026-06-29T00:38:41","guid":{"rendered":"https:\/\/www.fintechpulse8.com\/?p=9628"},"modified":"2026-06-29T00:38:41","modified_gmt":"2026-06-29T00:38:41","slug":"fidelity-reveals-serious-gap-in-retirement-portfolios","status":"publish","type":"post","link":"https:\/\/www.fintechpulse8.com\/?p=9628","title":{"rendered":"Fidelity reveals serious gap in retirement portfolios"},"content":{"rendered":"
<\/p>\n
For many Americans, decades of steady growth in a 401(k) balance can reinforce confidence that retirement planning is on track. <\/p>\n
But a rising account balance does not necessarily mean a portfolio is positioned to generate reliable income for retirees.<\/p>\n
Fidelity’s first-quarter 2026 retirement analysis indicates that many savers near retirement hold portfolios skewed toward growth rather than income generation.\u00a0<\/p>\n
The data comes during a period of heightened market turbulence that has pressured retirement accounts, regardless of age group or account type.<\/p>\n
Half of older Fidelity 401(k) participants overweight in stocks<\/h2>\n
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.\u00a0<\/p>\n
That rate is the highest of any age group and sits well above the 34% average across all 401(k) participants, the report confirmed.<\/p>\n
Among savers aged 65 to 69, close to four in 10 also carry stock allocations above the levels Fidelity considers appropriate, the analysis indicated.\u00a0<\/p>\n
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.\u00a0<\/p>\n
Carrying a significantly higher stock percentage means accepting more market risk than the fund’s design considers suitable for that particular retirement stage.<\/p>\n
Only 5.7% of participants adjusted their asset allocation during the first quarter of 2026, even as market volatility shifted portfolio weightings, Fidelity stated.<\/p>\n
Market downturn in early retirement can permanently shrink savings<\/h2>\n
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.\u00a0<\/p>\n
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.\u00a0<\/p>\n
More Fidelity:<\/strong><\/p>\n
\n
Fidelity offers a lifeline to millions before Social Security shifts<\/strong><\/li>\n
Fidelity flags major 401(k), IRA shift as Americans struggle<\/strong><\/li>\n
Fidelity cuts to the chase on 401(k) best practices<\/strong><\/li>\n<\/ul>\n
The research illustrates the risk with a scenario involving two hypothetical retirees who each start with $1 million and withdraw $50,000 every year.\u00a0<\/p>\n
The retiree who encounters strong returns early and a bear market later finishes with more than $3 million after 30 years of withdrawals.<\/p>\n
The retiree who faces negative returns first and then recovers sees the entire portfolio depleted by year 27, according to Fidelity’s data.<\/p>\n
Those forced withdrawals require selling shares at depressed prices, which permanently reduces the capital available to benefit from any eventual market rebound.\u00a0<\/p>\n
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.\u00a0<\/p>\n\n
A market crash early in retirement can devastate savings, as sequence-of-returns risk forces withdrawals at low prices and shortens portfolio longevity.<\/p>\n
Social Security covers only a fraction of the income retirees require<\/h2>\n
One reason equity-heavy allocations persist into retirement is that many savers remain focused on portfolio growth without planning for sustainable income generation.\u00a0<\/p>\n
Fidelity estimates that retirees should aim to replace up to 80% of their pre-retirement income to maintain their current standard of living.<\/p>\n
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.\u00a0<\/p>\n
With traditional pensions continuing to vanish across the private sector, investment portfolios have become the primary source of supplemental retirement income for most Americans.<\/p>\n
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.\u00a0<\/p>\n
Portfolios with heavier equity concentrations generally support lower safe withdrawal rates because additional volatility amplifies sequence-of-returns exposure, the report indicated.<\/p>\n
Retirement portfolios need an income layer, not just a growth engine<\/h2>\n
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.\u00a0<\/p>\n
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.\u00a0<\/p>\n
The firm recommends withdrawing no more than 4% to 5% of total portfolio value in the first year of retirement, its analysis noted.\u00a0<\/p>\n
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.<\/p>\n
Financial Advisor Jared Chase highlighted a different dimension of the risk in an interview with Kiplinger.<\/p>\n
\n
A large retirement risk for many affluent households isn’t volatility, it’s becoming too conservative too early and failing to maintain purchasing power.<\/p>\n<\/blockquote>\n
That tension between protecting capital and maintaining growth potential is precisely what makes the final years before retirement so consequential for portfolio decisions.\u00a0<\/p>\n
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.<\/p>\n
Address a stock-heavy portfolio before it becomes a problem<\/h2>\n
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.\u00a0<\/p>\n
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.<\/p>\n
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.\u00a0<\/p>\n
Charles Schwab has recommended that retirees keep two to four years of expenses in liquid, short-term investments as a buffer against steep declines.<\/p>\n
“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.<\/p>\n
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?<\/p>\n
Related: Are Your Retirement Savings Safe? Inside Insurance Ratings & the Annuity Boom<\/strong><\/p>\n
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… <\/p>\n","protected":false},"author":1,"featured_media":9629,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[246],"tags":[2562,2160,4508,208,764],"class_list":["post-9628","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-popular","tag-fidelity","tag-gap","tag-portfolios","tag-retirement","tag-reveals"],"_links":{"self":[{"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=\/wp\/v2\/posts\/9628","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=9628"}],"version-history":[{"count":0,"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=\/wp\/v2\/posts\/9628\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=\/wp\/v2\/media\/9629"}],"wp:attachment":[{"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=9628"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=9628"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=9628"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
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