Silver-Haired Investors Take Center Stage in US Stock Market Boom
Move over, Generation Z. While younger investors capture headlines with crypto and meme stocks, America's grandparents are quietly reshaping the financial landscape. A profound shift is underway as elderly Americans embrace stock market investing with unprecedented enthusiasm.
The Numbers Tell a Compelling Story
Americans aged 70 and older now control a staggering 39% of all stocks and mutual funds. This represents nearly double their typical ownership share from 1989 to 2009. The trend reflects more than just demographic changes.
Yes, America's population is aging. In 2010, only 9% of Americans were 70 or older. Today, that figure stands at 12%. But demographics alone cannot explain this dramatic shift. If older investors had maintained their traditional portfolio allocations, their stock market wealth would have increased only half as much since the 2007-09 financial crisis.
The past five years have witnessed particularly rapid change. Nearly half of the $24 trillion increase in stock and mutual-fund wealth has flowed to investors over 70. This represents a fundamental transformation in how older Americans approach investing.
Redefining Risk in Retirement
Traditional financial wisdom suggests elderly investors should prioritize wealth preservation over growth. The classic rule of thumb recommends subtracting your age from 100 to determine your stock allocation. By this measure, a 75-year-old should keep just 25% of assets in equities.
Today's older investors are rewriting these rules. Many now maintain stock allocations of 60% or higher. Jay Gourley, a 77-year-old mathematics student at George Mason University, exemplifies this new approach. "Unless I have an unusually long lifespan, I have enough to survive on for the rest of my life," he explains. "I can take on some risk without worrying about having to panhandle."
Gourley's portfolio reflects this philosophy. He keeps about 8% in cash, with the remainder divided between index funds and individual stocks. If market conditions deteriorate, he would shift toward defensive industries rather than retreating to bonds.
Why Bonds Lost Their Appeal
The bond market's changing dynamics help explain this shift. From 1980 to 2005, ten-year Treasury yields averaged 3.8 percentage points above inflation annually. Since then, that figure has plummeted below 0.5 percentage points.
The post-pandemic inflation surge further eroded bond returns. Thomas Van Spankeren of RISE Investments observes that many older clients now assume American stock markets will continue their strong performance. "So why bother with piddling returns on bonds?" they reason.
Financial planner Michelle Gessner reports that most of her Houston-based clients in their 70s maintain at least 60% stock allocations. In one extreme case, a client in her late 90s purchased Nvidia shares while in hospice care, despite possessing a $20 million net worth.
Fear of Missing Out Affects All Ages
Older investors prove just as susceptible to FOMO (fear of missing out) as their grandchildren. This psychological factor, combined with disappointing bond returns, drives their increased stock market participation.
Some financial researchers support this approach. In 2014, Wade Pfau and Michael Kitces found that retirees could benefit by gradually increasing stock allocations throughout retirement. Their research suggests that selling stocks during market slumps locks in losses and misses eventual rebounds.
Historical data supports their conclusion. An investor starting retirement with 30% in stocks and gradually increasing to 80% would typically outperform someone moving in the opposite direction over a 30-year period.
Global Perspectives on Retirement Investing
Recent research from Emory University, the University of Arizona, and the University of Missouri proposes even more aggressive strategies. Their study of centuries of data from 39 countries suggests retirees should allocate one-third of portfolios to American stocks and two-thirds to international equities.
According to their analysis, retirees withdrawing 4% annually face dramatically different outcomes based on investment strategy. Those investing solely in short-term bonds have a 39% chance of depleting their savings. A balanced portfolio reduces this risk to 17%, while an all-equity approach drops it to just 7%.
Potential Market Implications
While stock-heavy portfolios may benefit individual retirees, they could create systemic risks. During market downturns, older investors face different pressures than their younger counterparts.
Younger investors can weather losses knowing they have decades to recover. Older investors lack this luxury. Those who invested aggressively due to FOMO might reverse course during extended downturns, especially if they need cash for medical care or other expenses.
Large-scale selling by elderly investors could exacerbate market declines. The silver lining? Some evidence suggests older investors demonstrate remarkable resilience. A Schroders survey found that only 25% of investors aged 71+ adjusted their portfolio risk during the 2020 pandemic slump—the smallest percentage of any age group.
Many older investors today remember market recoveries after the 1987 crash, the dotcom bubble, and the 2007-09 financial crisis. These experiences may fortify their resolve during turbulent times.
The Ultimate Test Awaits
Whether today's silver-haired investors will prove to be "ride-or-die" stockholders remains uncertain. Their true mettle will only become apparent during the next significant market downturn.
The stakes have never been higher. With older Americans controlling nearly two-fifths of stock market wealth, their investment decisions will significantly influence market stability. Their collective actions during future crises will determine whether this new investing paradigm represents wise adaptation or dangerous speculation.
