Remember when the 60/40 glidepath was the gold standard? Well, it's time to bury it.
The reason is simple: We're living a lot longer than we used to.
By 2054, one in every hundred people will be older than 100 years. Add up all the people who ever lived to age 90, and you'll discover that 90% of them are alive right now. Compare that to 1900, when life expectancy in the U.S. was 47. Or the American Revolution, when more than a dozen of the signers of the Declaration of Independence were 35 or younger.
Yet, the 60/40 portfolio — which begins to ratchet that 60% stock allocation down to 50%, then to 40% and 30%, beginning when the clients reach age 65, was designed for people who'd live in retirement for maybe 20 years.
But what if most of your clients live 40 years? Or 50? Suddenly, that 60/40 glidepath looks pretty risky.
You would never tell a 30-year-old — someone who you expect to live for 40-plus more years — to invest only 30% of their assets into stocks. So why tell that to someone who's 60 who also has 40 years to go?
Yup, it's time to rethink that 60/40 glidepath.
First, extend it. Maintain the 60% allocation (or even increase it) well into the client's 70s and 80s.