Most baby boomers are retired already, or are getting close to it. Unfortunately, far too many are putting their retirement security at risk. Recent data from Fidelity shows members of this generation are the most likely to be overinvested in stocks and thus invested too aggressively based on their retirement timeline. 

Fidelity reports 23.2% of employees enrolled in a defined contribution plan have too much equity exposure, with boomers most likely to make this potentially costly error. Unfortunately, that could be an especially big problem as all boomers will be at least 65 by 2030 and most don’t have much time left to wait out market downturns. 

Why is it so dangerous for older Americans to be overinvested in the market? 

Investing in the market is important to build wealth, but putting too much money into stocks can be a problem because market crashes are inevitable and can come on suddenly. While recovery is also inevitable, it can sometimes take awhile. 

Younger investors can wait it out if their investments face sudden and unexpected losses. But sometimes a recovery takes years. For baby boomers who have to start making withdrawals to live on, there may not be time to sit around until stock prices climb. Instead, current and near-retirees who are overinvested in stocks could find themselves forced to sell shares at an inopportune moment.

Selling a stock shortly after a market crash not only locks in the losses you’ve experienced, but it could also mean that your account balance falls to a dangerously low level much more quickly.

Say you were counting on your investments to produce $40,000 of income, following the 4% rule to make sure you don’t run out of money.If you had $1 million, you’d be in good shape. But if the market crashes when you’re overinvested and you suffer big losses, you’d be in trouble. If yourbalance declined by, say, 25% and you have no emergency cash to draw from,you’d either have to drastically cut your budget or take out around 5.3% of your balance to get your $40,000. That’s far above what most experts believe is a safe withdrawal rate. 

How can baby boomers fix their asset allocation? 

Fixing your asset allocation is easy: Look at how much of your money is in the stock market. If it’s too much, sell some of your stocks and shift the money to bonds.There are a number of different ways to assess the amount of equity exposure you should have, but one of the simplest approaches is to subtract your age from 110. 

If you’re one of the older boomers and are 70, for example, you’d want to have about 40% of your portfolio in the market. If you’re a younger boomer and just turned 60, you’d ideally have closer to half your money in the market. If you’ve got much more than that invested, consider whether you’re comfortable with the outsize level of risk you’re taking on.

You don’t want to just leave your portfolio alone due to complacency and end up finding yourself in financial trouble if a crash happens at exactly the wrong time. If you’re one of the many boomers who are overexposed to the market, you may want to act before something goes very wrong.