Retirement at Risk: Study Finds Vast Majority of Vulnerable Retirees Lack Proper Portfolio Diversification

A new study is sounding the alarm for retirees navigating today's complex financial landscape. Contrary to conventional wisdom, the greatest threat to a secure retirement may not be market volatility itself, but a poorly constructed portfolio that fails to grow over the long haul. Research from Jackson National Life Insurance Co. reveals a startling statistic: 86% of retirees deemed at high risk are failing a fundamental test of diversification, potentially setting themselves up for a shortfall later in life.

The 2025 study, which surveyed over 1,000 investors, assessed exposure to market risks using five financial benchmarks, including spending habits and asset allocation. It found that 22% of retirees fell into the high-risk category. The primary failing for this group was an inability to spread investments across at least four of five key asset categories—such as stocks, bonds, and cash. Instead, many are over-allocating to perceived safe havens; nearly half of their assets are held in cash, significantly above the recommended 20% threshold.

"This is a classic case of fighting the last war," says Ryan Graves, founder of Bemiston Asset Management. "Retirees scarred by past downturns flock to bonds and cash, thinking they're playing it safe. But in doing so, they're locking in a guarantee that inflation will erode their purchasing power year after year. Excessive conservatism isn't safety—it's a slow-motion financial crisis."

The issue is compounded by common misconceptions. Some investors mistake holding a collection of accounts for a diversified strategy, accumulating a "hodgepodge of overlapping funds and stocks without a coherent plan," notes Malissa Marshall of Soaring Wealth. Others over-rely on popular indices like the S&P 500, which Beau Kemp, an advisor at SwitchPoint Financial Planning, points out is heavily concentrated in large U.S. companies. "History shows us that leadership rotates. The 2000s were dominated by small caps and emerging markets while large caps lagged. A portfolio tied solely to the S&P 500 missed that entirely," Kemp explains.

Financial professionals stress that true diversification requires a multi-layered approach. This includes maintaining a cash buffer for near-term expenses—with some advisors now recommending up to five years' worth in low-volatility assets—while ensuring the growth portion of the portfolio is itself diversified across U.S. small and mid-cap stocks, international developed markets, and emerging markets. "This isn't just about asset classes; it's about ensuring different parts of your portfolio can perform when others don't, which is crucial for managing 'sequence of returns' risk in retirement," adds Kemp.

Furthermore, a static plan is often insufficient. Experts advocate for dynamic strategies that allow for flexible spending and tactical adjustments. "If the math shows your bond yields are losing to inflation, it's time to reconsider that allocation. Retirement planning isn't a 'set it and forget it' endeavor," Graves advises.

The bottom line for retirees is clear: in the quest for safety, an unbalanced portfolio heavy on cash and bonds may introduce even greater risks—outliving savings and losing ground to inflation. Building a resilient retirement plan requires a deliberate, diversified strategy that balances growth with stability, and remains adaptable to changing economic conditions.

Reader Reactions

David Chen, 68, Retired Engineer: "This study hits home. I spent years worrying about market crashes and kept too much in cash. Now I see my savings aren't keeping up with rising costs. It's a tough lesson learned too late."

Susan Miller, Certified Financial Planner: "The data underscores a critical advisory gap. It's not enough to tell clients to diversify; we must actively help them understand what that means across global markets and asset classes, and combat their innate bias toward 'safety.'"

Marcus Johnson, 72, Former Teacher: "This is fear-mongering. After 2008, I moved everything to bonds and CDs, and I sleep soundly. Chasing stock market growth at my age is the real gamble. These 'experts' just want to manage your money for a fee."

Priya Sharma, Economist: "The structural issue is deeper. With bond yields historically low and inflation sticky, the traditional 60/40 portfolio is under immense pressure. Retirees need professional guidance now more than ever to navigate this new normal."