As retirees approach and surpass age 70, many question whether certain retirement accounts are still safe. With life expectancies increasing, the need to balance growth and security becomes more pressing. Market volatility, inflation, and changing tax laws can all impact the safety of retirement funds. Some accounts that were once considered reliable may now carry higher risks than retirees realize. Understanding which retirement accounts may be too risky is essential for long-term financial security. Here are five retirement accounts you should avoid after 70.
1. Market-Exposed Accounts
Stocks and equity-heavy retirement accounts can be volatile, especially in later years. According to Fidelity, retirees heavily invested in equities may face significant losses during market downturns. While stocks offer growth potential, large losses can quickly erode retirement funds. Diversifying into more stable investments can help mitigate this risk as one ages.
2. High-Fee Accounts
Some retirement accounts carry fees that may not be apparent at first. The Investment Company Institute notes that high management or administrative fees can significantly reduce long-term returns. After age 70, these fees can disproportionately impact retirees who rely on their funds for living expenses. Switching to lower-cost funds or accounts may preserve more capital for essential needs.
3. Tax-Deferred Accounts
Accounts like traditional IRAs and 401(k)s defer taxes until withdrawal, but Required Minimum Distributions (RMDs) after age 72 can create risks. According to the Internal Revenue Service (IRS), failing to take RMDs or miscalculating withdrawals can result in steep penalties. Large distributions may also push retirees into higher tax brackets, reducing net income. Planning withdrawals carefully is crucial to minimize these risks.
4. High-Risk Investments
Some retirement accounts contain alternative investments like private equity, commodities, or leveraged funds. While these can provide high returns, they also carry high volatility. Retirees should regularly review account holdings and adjust based on risk tolerance and time horizon. Consulting a financial advisor can help ensure these investments align with long-term retirement goals.
5. Accounts Without Guaranteed Income
Accounts without guaranteed income, such as regular brokerage accounts or variable annuities without riders, expose retirees to market swings. Having a predictable income is key to avoiding financial shortfalls in retirement. Without it, even conservative retirees may struggle to cover expenses during downturns. Considering annuities or other income-focused products can reduce exposure to these risks.
Why Some Retirement Accounts May Be Too Risky After 70
Not all retirement accounts are created equal, and some may carry risks that retirees cannot afford after age 70. Market volatility, fees, tax implications, and lack of guaranteed income all factor into how safe an account is. Regularly reviewing investments and adjusting allocations can help ensure long-term security. Protecting retirement accounts is critical for maintaining a stable and comfortable lifestyle in later years. Retirees should also consider diversifying across different account types to reduce overall risk. Seeking professional advice can help identify accounts that best support income needs and financial goals in retirement.
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Teri Monroe started her career in communications working for local government and nonprofits. Today, she is a freelance finance and lifestyle writer and small business owner. In her spare time, she loves golfing with her husband, taking her dog Milo on long walks, and playing pickleball with friends.
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