I’m Retiring in 5 Years. Should My Money Still Be in Stocks?

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If you’re in the process of saving for retirement, you’ll often hear that it’s best to rely on the stock market to grow your nest egg rather than stick to safer assets like savings accounts or CDs.Alert: highest cash back card we’ve seen now has 0% intro APR into 2026
This credit card is not just good – it’s so exceptional that our experts use it personally. It features a 0% intro APR for 15 months, a cash back rate of up to 5%, and all somehow for no annual fee!
Click here to read our full review for free and apply in just 2 minutes. Savings accounts and CDs offer the benefit of being able to grow your money in a risk-free manner. As long as your bank is FDIC insured and your deposit is $250,000 or less, you’re guaranteed not to lose money.But you should also know that historically, the stock market has delivered much higher returns than savings accounts and CDs. Over the past 50 years, the S&P 500’s average annual return has been 10%, accounting for years when stocks did great and years when stocks lost value. If you compare 10% to what savings accounts and CDs are paying today — somewhere around 4% — stocks win by a longshot.Plus, when you invest your money over a long period, you minimize your risk by giving yourself plenty of time to ride out market downturns. It pays to open a brokerage account and use the power of the stock market to turn your retirement savings into a much larger sum of money over time. Click here for a list of our favorite stock brokers.But while it’s one thing to rely on stocks to build retirement savings, you may want to shift your approach once you’re getting ready to actually retire. That doesn’t mean getting rid of stocks completely, though.Strike a balance with your portfolioSince the stock market has such a strong history of rewarding long-term investors, it pays to go heavy on stocks when retirement is pretty far off.If you put $300 into a brokerage account or IRA every month for 30 years, you’re contributing a total of $108,000, which is a nice amount of money in its own right. But if your investments give you a 10% yearly return, then after three decades, your $108,000 in contributions will be worth around $592,000. That’s a gain of $484,000.That said, the one rule you must follow when investing in stocks is to give yourself time to ride out market downturns. For this reason, if you’re five years away from retirement, you should not keep all or even the majority of your portfolio in stocks.You want to make sure a good portion of that money is invested in a safer manner, because you might need to start withdrawing from your savings pretty soon. And if the market happens to be down at that time, you don’t want to get stuck cashing out investments at a lower value.But you also don’t want to dump your stocks completely. It’s important to keep some of your money invested in stocks during retirement so it can continue to grow. So what you may want to do once you’re five years from ending your career is keep about 50% of your savings in stocks, but put the other 50% into safer choices. That could be a combination of bonds and cash.In fact, if you’re five years from retirement, now’s not a bad time to open a 60-month CD while rates are still strong. That allows you to earn a decent chunk of interest on some of your savings in a virtually risk-free manner. Click here for a list of the best CD rates to get started.Consider your tolerance for riskGenerally speaking, it’s a smart idea to shift away from stocks as retirement nears. And if you’re five years away, limiting stocks to about 50% of your portfolio could be a wise move.But also take your personal risk tolerance into account. If you’re not comfortable with the idea of having half of your savings in stocks, go lower. On the flipside, if you’re willing to take on more risk, go higher — say, by keeping about two-thirds of your portfolio in the stock market if that won’t cause you to lose sleep.It’s OK to tailor your investment strategy to your comfort level as long as you understand the pros and cons of going lighter or heavier on stocks as retirement nears. Also, consider sitting down with a financial advisor if you’re not sure what route is best for you.Alert: highest cash back card we’ve seen now has 0% intro APR into 2026
This credit card is not just good – it’s so exceptional that our experts use it personally. It features a 0% intro APR for 15 months, a cash back rate of up to 5%, and all somehow for no annual fee!
Click here to read our full review for free and apply in just 2 minutes. We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
Motley Fool Money does not cover all offers on the market. Editorial content from Motley Fool Money is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.”}]] [[{“value”:”

If you’re in the process of saving for retirement, you’ll often hear that it’s best to rely on the stock market to grow your nest egg rather than stick to safer assets like savings accounts or CDs.

Alert: highest cash back card we’ve seen now has 0% intro APR into 2026

This credit card is not just good – it’s so exceptional that our experts use it personally. It features a 0% intro APR for 15 months, a cash back rate of up to 5%, and all somehow for no annual fee!

Click here to read our full review for free and apply in just 2 minutes.

Savings accounts and CDs offer the benefit of being able to grow your money in a risk-free manner. As long as your bank is FDIC insured and your deposit is $250,000 or less, you’re guaranteed not to lose money.

But you should also know that historically, the stock market has delivered much higher returns than savings accounts and CDs. Over the past 50 years, the S&P 500’s average annual return has been 10%, accounting for years when stocks did great and years when stocks lost value. If you compare 10% to what savings accounts and CDs are paying today — somewhere around 4% — stocks win by a longshot.

Plus, when you invest your money over a long period, you minimize your risk by giving yourself plenty of time to ride out market downturns. It pays to open a brokerage account and use the power of the stock market to turn your retirement savings into a much larger sum of money over time. Click here for a list of our favorite stock brokers.

But while it’s one thing to rely on stocks to build retirement savings, you may want to shift your approach once you’re getting ready to actually retire. That doesn’t mean getting rid of stocks completely, though.

Strike a balance with your portfolio

Since the stock market has such a strong history of rewarding long-term investors, it pays to go heavy on stocks when retirement is pretty far off.

If you put $300 into a brokerage account or IRA every month for 30 years, you’re contributing a total of $108,000, which is a nice amount of money in its own right. But if your investments give you a 10% yearly return, then after three decades, your $108,000 in contributions will be worth around $592,000. That’s a gain of $484,000.

That said, the one rule you must follow when investing in stocks is to give yourself time to ride out market downturns. For this reason, if you’re five years away from retirement, you should not keep all or even the majority of your portfolio in stocks.

You want to make sure a good portion of that money is invested in a safer manner, because you might need to start withdrawing from your savings pretty soon. And if the market happens to be down at that time, you don’t want to get stuck cashing out investments at a lower value.

But you also don’t want to dump your stocks completely. It’s important to keep some of your money invested in stocks during retirement so it can continue to grow. So what you may want to do once you’re five years from ending your career is keep about 50% of your savings in stocks, but put the other 50% into safer choices. That could be a combination of bonds and cash.

In fact, if you’re five years from retirement, now’s not a bad time to open a 60-month CD while rates are still strong. That allows you to earn a decent chunk of interest on some of your savings in a virtually risk-free manner. Click here for a list of the best CD rates to get started.

Consider your tolerance for risk

Generally speaking, it’s a smart idea to shift away from stocks as retirement nears. And if you’re five years away, limiting stocks to about 50% of your portfolio could be a wise move.

But also take your personal risk tolerance into account. If you’re not comfortable with the idea of having half of your savings in stocks, go lower. On the flipside, if you’re willing to take on more risk, go higher — say, by keeping about two-thirds of your portfolio in the stock market if that won’t cause you to lose sleep.

It’s OK to tailor your investment strategy to your comfort level as long as you understand the pros and cons of going lighter or heavier on stocks as retirement nears. Also, consider sitting down with a financial advisor if you’re not sure what route is best for you.

Alert: highest cash back card we’ve seen now has 0% intro APR into 2026

This credit card is not just good – it’s so exceptional that our experts use it personally. It features a 0% intro APR for 15 months, a cash back rate of up to 5%, and all somehow for no annual fee!

Click here to read our full review for free and apply in just 2 minutes.

We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
Motley Fool Money does not cover all offers on the market. Editorial content from Motley Fool Money is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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