The short answer is, it depends. We would suggest that the question isn’t whether the stock market is “too risky,” but whether you’re managing your investment risks according to your retirement goals.

We advise taking on market risk in proportion to your financial goals, and offsetting it with fixed income assets to dampen the volatility and meet your income needs. How much of each? An informed advisor can make a huge difference in helping you find the right mix for you. It also helps to understand the different kinds of investment risk involved:

1. “Idiosyncratic” risk — This is a fancy term for the risk inherent to individual securities. For example, Apple stock at least temporarily plummeted when the company’s charismatic leader Steve Jobs retired, but of course this was a risk exclusive to Apple. By diversifying (using low-cost mutual funds to capture the broad returns of stock asset classes instead of trying to capture the returns of individual stocks) we can spread your financial eggs across multiple baskets and effectively eliminate this form of risk from the equation.

2. Market risk (volatility) — Stock market risk in the form of volatility can cause the short-term value of your investments to move up and down, sometimes dramatically and often unpredictably. But because “short-term” volatility can last longer than those facing retirement can comfortably afford, it’s prudent to be wary of taking on more than is necessary. However, this is key: You can expect these same stock market risks to generate long-term wealth for you within your well-diversified portfolio. Nobody likes the uncertainty inherent in market risk, but even in retirement, your financial goals may well include the need to build in a measure of it, to maintain or build wealth.

3. Spending power risk — On the flip side of market risk, there’s the risk of being out of the market. It seems logical to assume that a flight to quality makes you “safer,” but a problem with this assumption is that risk-free investments lose spending power over time. In other words, if your dollar isn’t earning market returns, it eventually buys you less than it used to: $1 in 1980 bought you more than $1 today. So even in retirement, market investing helps you manage spending power risk.