Should I continue investing aggressively if I won’t spend all my wealth?

Many retirees with substantial savings face an unusual choice. If you know you will never spend all your wealth, should you keep investing aggressively in retirement, shift toward balance, or focus on preservation? The best answer depends on your goals, your tolerance for risk, and the legacy you want to leave.

Executive Summary

Investing aggressively in retirement can grow wealth for heirs or charities, but it also brings volatility. On the other hand, a conservative approach offers stability yet limits growth. A balanced strategy—covering essential expenses with safe assets and letting the rest compound—often provides the best mix of peace of mind and long-term impact. Taxes, estate planning, and your comfort with uncertainty should guide your choice.

Why This Decision Matters

For decades, retirement planning has focused on not running out of money. However, many high-net-worth retirees already have more than enough. For them, the question shifts from survival to stewardship: how should extra wealth be managed to create lasting value?

This matters because:

• Security: Even with surplus wealth, poor risk management can create unnecessary stress.
• Legacy: How you invest affects what heirs or charities will actually receive.
• Efficiency: Taxes and inflation can erode wealth if not planned for properly.

Clarify Your Goals First

Before deciding whether to keep investing aggressively, define what success means to you. For example, some retirees focus on:

• Security: Making sure they never outlive resources.
• Legacy: Passing meaningful wealth to children or grandchildren.
• Philanthropy: Funding causes or charities that reflect their values.
• Growth: Continuing to expand their estate simply because they enjoy building it.

Once your goals are clear, it becomes easier to align your investments with what truly matters.

The Case for Staying Aggressive

Investing aggressively in retirement often means holding more equities, private equity, or real estate. This strategy can be appealing for several reasons:

• Long-term growth: Over 1928–2024, U.S. large-cap stocks returned about 9–10% annually, outpacing bonds and cash.
• Inflation defense: Equities do not hedge inflation in the short term, yet they tend to beat inflation over long periods.
• Wealth maximization: If heirs or charities will not use the money for decades, compounding has time to work.

Consider an example. If $5 million compounds at 7% a year, it becomes about $10.5 million in 11 years. Since you may not need to touch the money, this growth could significantly increase your legacy.

The Risks of Aggressive Investing

However, every advantage comes with trade-offs. Aggressive portfolios expose retirees to the following risks:

• Volatility: Equity markets can fall 20–40% in recessions. Watching your portfolio shrink can create stress, even if daily living is secure.
• Sequence of returns risk: If withdrawals happen during a downturn, losses compound quickly.
• Legacy uncertainty: A bear market late in life can reduce what heirs or charities ultimately receive.

For instance, a $3 million portfolio with 80% in equities that loses 30% in a downturn suffers a $720,000 decline. That reduction can shrink growth potential even if you do not rely on the funds for income.

The Balanced Middle Ground

Fortunately, you do not have to choose between extremes. A balanced approach protects near-term spending while still allowing surplus wealth to grow. A common framework looks like this:

1. Secure the foundation: Hold enough cash and high-quality bonds to cover 10–12 years of core expenses. For example, two years in cash plus eight to ten years in Treasuries or investment-grade bonds.
2. Invest for growth: Keep the rest in equities, real estate, or other long-term assets.
3. Review and rebalance: Adjust allocations every few years or after major life changes.

Portfolio Approaches in Retirement: What Each One Emphasizes

Approach	Typical Mix (Illustrative)	Main Goal	Strengths	Trade-offs	Best For
Aggressive	70–90% equities / growth	Maximize long-term growth	Highest compounding potential over decades	Higher volatility; larger drawdowns	Surplus wealth earmarked for heirs/charity
Balanced	50–60% equities; 40–50% bonds/cash	Blend stability and growth	Smoother ride; fewer forced sales	Lower upside than all-equity	Most retirees seeking peace of mind
Conservative	20–40% equities; 60–80% bonds/cash	Preserve capital and income	Predictable cash-flows; low volatility	Limited growth; inflation risk over time	High stress aversion; near-term spending

As a result, your lifestyle is insulated from market shocks, while long-term wealth still compounds. A 50/50 or 60/40 portfolio often achieves this balance. Historically, blended portfolios have softened losses compared to all-equity strategies while still producing real growth.

Tax and Estate Considerations

Investing aggressively in retirement affects more than portfolio returns. Tax and estate rules play a major role in outcomes:

• Step-up in basis: Most inherited non-retirement assets receive a step-up to fair market value at death, reducing capital-gains taxes. Retirement accounts do not.
• Charitable strategies: Donor-advised funds allow deductions up to 60% of AGI for cash gifts and 30% for appreciated assets. Charitable remainder trusts must distribute 5–50% of annual value to beneficiaries, with the rest going to charity.
• Estate tax limits: In 2025, the federal exemption is $13.99 million per person. Without new law, it will fall by about half in 2026.

Estate & Charitable Tools: How They Affect Your Legacy

Tool	What It Does	Tax Treatment	Control / Flexibility	Who Benefits	When It Helps Most
Step-Up in Basis (at death)	Resets basis of non-retirement assets to fair market value	Can reduce heirs’ capital gains on later sale	Automatic under current law; not for IRAs/401(k)s	Heirs	Highly appreciated taxable assets held until death
Donor-Advised Fund (DAF)	Front-loads a charitable gift; grant over time	Deduction generally up to 60% AGI (cash) / 30% (appreciated)	High—timing of grants is flexible	Charities	High-income years; appreciated stock gifts
CRUT (Charitable Remainder Unitrust)	Pays you/beneficiaries annually; remainder to charity	Immediate partial deduction; spreads gains	Moderate—payout set (5–50%); remainder locked to charity	You (income) & Charity (remainder)	Low-basis assets; desire for lifetime income + legacy
Direct Bequest via Will/Trust	Transfers assets to heirs or charities at death	Subject to estate/inheritance rules; step-up may apply	High—design terms, timing, and protections	Heirs and/or charities	Broad legacy goals; need for custom control

Failing to align investments with estate planning can cost heirs. The federal estate tax rate tops out at 40%, and several states add their own estate or inheritance taxes.

When Conservatism Wins

There are also times when conservative allocations make sense:

• You value predictability and dislike watching large swings in your balance.
• You expect high healthcare costs or family obligations.
• You prefer giving during your lifetime rather than maximizing compounding after death.

In these cases, stability itself becomes the return. A conservative mix may yield less, but it can reduce stress and create confidence in your plan.

Checklist: Should You Invest Aggressively?

Ask yourself the following questions:

• Do I need portfolio growth for my lifestyle, or only for legacy?
• Would a 30% market drop affect my peace of mind or spending?
• Am I willing to let heirs or charities bear market risk?
• Have I updated my estate plan to match current rules?
• Can I stay disciplined when markets fall?

Key Takeaways

• Investing aggressively in retirement can grow wealth for heirs but brings volatility.
• Cover near-term expenses with safe assets and invest the rest for long-term goals.
• Taxes, estate laws, and the 2026 exemption change are just as important as returns.
• Your comfort with risk should guide allocations as much as your net worth.
• Review your plan regularly and adjust with discipline, not emotion.

Action Steps

1. Clarify whether your top priority is lifestyle, legacy, or philanthropy.
2. Run a stress test on your portfolio to model downturns.
3. Secure at least 10 years of expenses with cash and bonds.
4. Invest surplus funds in equities and other growth assets.
5. Work with an estate attorney and tax advisor to reduce future taxes.