By Quentin Fottrell
‘My spouse and I have a combined $5,500 in monthly Social Security payments and a $2,900-a-month pension’
“Another adviser says my investment ratio should be 55/45.” (Photo subjects are models.)
Dear Quentin,
I’m retiring next year at 63. I will have $1.5 million in savings. I’ve received conflicting advice.
One financial adviser says I should keep my investments allocated 70/30 in equities/bonds and cash. Another adviser says my investment ratio should be 55/45. My spouse and I have a combined $5,500 in monthly Social Security payments and a $2,900-a-month pension. We also have a monthly rental bringing in $800 and a small mortgage payment.
A Couple of Retirees
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You can email The Moneyist with any financial and ethical questions at qfottrell@marketwatch.com. The Moneyist regrets he cannot reply to questions individually.
If you are comfortable with 70/30, given that your pensions and Social Security means you won’t have to withdraw in a down market if you don’t want to, stick with your plan.
Dear Couple,
Your money will have to make money for the next 30 years, if you’re lucky.
In your 60s, most cautious financial advisers would push you towards an equity allocation of 50% given the “110 minus your age” rule. But that’s not set in stone. If you are comfortable with 70/30, given that your pensions and Social Security mean you won’t have to withdraw in a down market if you don’t want to, stick with your plan.
Here’s the headline: You’ll likely never run out of dough, given your guaranteed income of $110,400 a year and a 4% withdrawal rate, assuming a 10% nominal return on your stocks (7% after inflation is taken into account). Let’s say your lifestyle requires $120,000 a year, you could withdraw $10,000 from your investments, which is less than 1%.
With a 70/30 equities/cash and bonds allocation, you could end up with $2 million in your investment account in 30 years, enough to leave a nice inheritance for your children, if you have any, or just over $1 million with a 55/45 allocation. If I were your adviser, I would be comfortable encouraging you to have a higher risk tolerance, but that decision is entirely personal.
To put your allocation in context, your second adviser would probably regard your allocation as aggressive. There’s no golden rule for every retired investor over 60 when it comes to diversification, except that you should be able to cover your expenses with a 4% or less annual withdrawal rate, and also diversify your equity exposure.
T. Rowe Price suggests 60% for U.S. large-cap stocks, 25% international stocks in developed economies, 10% U.S. small-cap stocks and 5% in emerging markets. For bonds, it recommends 45% U.S. in investment-grade bonds, 10%-30% in U.S. Treasury bonds, 10% in nontraditional bonds, 10% in international bonds and 0%-10% in emerging markets.
Your relatively stable financial position and early retirement age suggest that you should err on the side of a slightly riskier asset allocation. You don’t say how much your mortgage payments are or when your home will be paid off, and you will have to cover your healthcare costs before you qualify for Medicare at 65.
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The average retirement savings for people 65 to 74 is $609,200. The median would be even lower. So you’re doing pretty well, with Social Security and a pension. Keep in mind that the Social Security Administration encourages people to delay taking benefits by offering 8% a year more past full retirement age until the age of 70.
Now for the caveat. Or caveats. You are retiring into an uncertain economic and political backdrop. We have wars in Ukraine and Gaza, the bombing of Israel by Iran and Iran by Israel and the U.S., and a U.S. foreign policy that has broken with the postwar Western alliance, plus stock-market volatility, partly due to the Trump administration’s proposed tariffs.
But you will join millions of retirees who have historically retired during economic and/or political instability. History provides solace as well as red flags: Over the past decade, U.S. equities rose 15% on average a year. Your goal should be closer to a 10% annual return over time, notwithstanding events like the Great Recession and pandemics.
Some context: Many economists have been predicting a recession since the end of the last recession in 2020. Two straight negative quarters of GDP growth is viewed as a solid indication that an official recession call is on the way, but that has not happened. Tying consumer confidence to the litany of economic data is not a job for the faint of heart.
Gross domestic product rose by 3% in the second quarter after slipping by 0.5% in the first quarter (the trade deficit fell sharply in the second quarter, providing a lift for GDP). You can reassess your decision to retire next year. Generally speaking, it’s not ideal to retire into a down market if you have to start withdrawing funds. You, from what you indicate, do not.
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-Quentin Fottrell
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09-22-25 0530ET
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