Wealthy retirees stick with stocks, and they’re happy

It’s conventional wisdom that the older you get, the safer your money should be. But what if you’re a retired high-net-worth investor with $1 million-plus in investable assets? These folks are mostly well-positioned to meet their basic retirement needs, and taking a long-term view, they spurn traditional asset allocation advice, according to a new UBS Investor Watch report, Retiring Old Clichés.

“Even people in their 80s are maintaining high equity exposure, investing for long-term growth,” says Sameer Aurora, who led the research team.

The rule of thumb is that your stock allocation should equal 100 minus your age (a 75-year-old would hold 25% in stocks, for example). But only 16% of those surveyed follow this rule. And 8 out of 10 of them maintained or increased their exposure to stocks after they retired.

Are high net worth investors too bullish? “Many clients need to be very careful about this,” says Paula Polito, client strategy officer at UBS Wealth Management Americas.

Polito says investors should first make sure that they’re covered for liquidity purposes—having enough cash flow to fund their lifestyle—and for longevity purposes—having a plan and the assets to carry it out for healthcare expenses, including long-term care. Then, once they’re financially secure, they’re very focused on their legacy—philanthropic causes and their heirs. “When you’re managing assets in the legacy bucket, you’re still trying to grow your portfolio,” Polito says. So, it makes sense to put more weight in stocks.

A 69-year-old investor put it this way in a survey interview: “Our spending is covered by our Social Security, my husband’s pension and interest earned every month. The rest is in investment accounts and that will be passed on to our children.”

A 79-year-old retired man said: “I never followed the traditional rule of investing nor believed in it. I feel holding cash and or bonds just reduces your return over time.”  A fellow retiree, age 67, said: “I would have missed a lot of capital gains if I had invested less in stocks, especially since the downturn.”

Most of the investors (9 in 10) said they were confident they were well-prepared financially for retirement, but the barrier is the emotional piece. “We talked to people already retired and they say, ‘Life is great! Don’t be afraid!” says Aurora. The wealthy investors said they reached peak happiness in retirement.

Ashlea Ebeling

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