6.9% of 401(k) Investors in Their 50s Are All in Stocks — and an Early Retirement Market Drop Can Be Especially Costly

The year you retire matters less than the year the market stumbles. For savers who head into their final working years entirely invested in stocks, an early downturn can change the shape of retirement more than almost anything else.

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Think about how many near-retirees keep every dollar in stocks, and why the timing of a market drop matters far more in the first years after retirement than at most other times. Many savers in their late 50s have remained fully invested for years, and that approach has looked rewarding recently. The S&P 500 is up about 13% so far in 2026 and roughly 263% over the past 10 years on a price basis, which has given few reasons for investors to change course.

How Many Savers in Their 50s Are Fully in Stocks

Fidelity’s fourth-quarter 2025 401(k) data includes 24.8 million participants as of December 31, 2025. On its platform, 6.6% of savers have a 100% equity allocation, meaning they hold no bonds or cash.

Among savers in their 50s, that figure is slightly higher at 6.9%. Fidelity also says many participants age 55 and older keep more in stocks than their age alone would suggest. One reason may be how they enrolled: more than 40% of workers in their 50s and early 60s choose their own investments, since many joined before automatic target-date funds became common.

Why the Order of Bad Years Can Matter More Than the Average

This is known as sequence-of-returns risk. Two people can earn the same average return over retirement and still end up with very different account balances depending on when the bad years occur. While someone is still working, a downturn mainly slows progress. Once withdrawals begin, a decline can force the sale of shares at low prices to cover spending, and those shares are no longer available to participate in the recovery.

Consider a simple example using fixed assumptions. Two retirees each begin with $500,000 and withdraw $30,000 at the start of each year for five years, with no fees, taxes, or inflation adjustments.

• Retiree A: -20%, -10%, +10%, +15%, and +25%, in that order.
• Retiree B: the same returns in reverse order.

Both retirees average 4% per year, but Retiree A, who encounters the losses first, finishes with $364,339. Retiree B ends with $438,411, a difference of about $74,072 created only by the order of the same five returns.

This has happened in real markets. Federal Reserve data show that household stock and mutual fund holdings among people ages 55 to 69 fell about 47% between the third quarter of 2007 and the first quarter of 2009.

Volatility has also increased recently. The VIX, a measure of expected market swings, reached 31 on March 27, 2026, a level associated with elevated fear, before easing to 18 in late October.

Common Ways Retirees Handle the Risk

Retirees often rely on several strategies, sometimes at the same time:

• A cash buffer. Some set aside a few years of spending in cash or short-term bonds so they do not need to sell stocks during a downturn.
• A gradual shift. Others slowly move toward bonds in the years before retirement. Target-date funds do this automatically, and Fidelity says 45.4% of Boomers keep all of their 401(k) savings in a single fund, compared with 63.0% of savers overall.
• Flexible withdrawals. Some retirees spend less after a bad year, leaving more shares invested to recover.
• Delaying Social Security. According to the Social Security Administration, benefits increase 8.0% for each year someone delays past full retirement age for people born in 1943 or later, up to age 70. A larger benefit can reduce how much needs to come from the portfolio.

Risks That Come With Holding Too Little in Stocks

There is also a downside to having too little in stocks. Retirement can last 30 years or more, and a portfolio that is mostly cash and bonds may not keep pace with inflation over that span. That is one way people can slowly run out of money even without a market crash. Stocks have historically provided long-term growth for many retirees, and that need for growth may continue after retirement begins.

That is why most planning discussions focus on the mix needed for the years around retirement. Stocks still belong in the picture, but the money needed for the first few years of withdrawals is often treated differently from funds that will not be used for a decade or longer.

A Question Planners Often Raise Before Retirement

For savers in that 6.9% group, the key planning question is often this: if stocks dropped sharply in the first year of retirement, how many years of spending could be covered without selling any shares? Depending on the answer, the current allocation may already fit the retirement timeline, or it may still be positioned for someone who is many years away from needing the money.