Every few years, a financial pundit declares that the “60/40 portfolio is dead.” What typically follows are claims that financial advisers will need to change how they work — and that retirees will need to rethink how they save.
From our perspective, 60/40 was never the plan to begin with.
The traditional 60/40 portfolio — 60% stocks and 40% bonds — has long been considered a general guideline for long-term retirement planning. The idea is that in strong market years, stocks drive portfolio growth, while in down years, bonds help preserve assets, carrying investors through to the next bull market. Over time, guidelines like this can morph into perceived “standards” because they’re based on the most common scenarios.
However, in years like 2022, when both stocks and bonds declined, these rules of thumb didn’t hold up. And when you factor in longer life expectancies, rising healthcare costs, and increased market volatility, historical guidelines can begin to show their limitations.
Many conventional assumptions are built on broad averages — drawn from millions of people with varying income levels, family situations, and time periods. Consider common guidelines: subtracting your age from 100 to determine stock allocation; assuming you’ll need 80% of your pre-retirement income in retirement; carrying six to eight times your income in life insurance; saving 10% of your income; or withdrawing 4% annually in retirement. While these guidelines may suit the average investor, they aren’t necessarily for you.
Before you panic about the 60/40 portfolio “no longer working,” take a step back and consider how much you actually rely on simplified formulas. Financial planning shouldn’t be a one-size-fits-all approach. It should account for the many variables that influence how your money is earned, spent, and invested.
At Henssler Financial, we take a needs-based approach to financial planning. We start by understanding how much an investor spends today and project what those spending needs may look like in retirement. We then build a cash flow projection that incorporates investment growth, annual spending, inflation, rising healthcare costs, taxes, and the planned depletion of assets by the time the youngest spouse reaches age 92. These projections are revisited at least every two years to ensure they reflect actual spending patterns.
Once we determine how much and when an investor will need to withdraw from their portfolio, we allocate the next 10 years of expected cash needs into laddered, high-quality fixed-income investments, such as FDIC-insured CDs or U.S. Treasury bonds. This approach is intended to help manage the impact of stock market volatility on essential funds. When held to maturity and within applicable limits, these investments are generally considered to offer a high degree of principal stability.
The remainder of the portfolio is typically invested in equities to pursue long-term growth. Because we are always planning for needs that are 10 or more years in the future, there is time to adjust spending, navigate market volatility, and refine goals as circumstances change.
When basing investment decisions on when the money is needed, no two financial plans look the same. Some may end up with a 60/40 allocation, but only because their plan calls for it, not because of their age or a generalized guideline.
If you have questions on your asset allocation for retirement, the experts at Henssler Financial will be glad to help:
- Experts Request Form
- Email: experts@henssler.com
- Phone: 770-429-9166
Listen to the May 2, 2026 “Henssler Money Talks” episode.
Disclosure: This article is for demonstrative and academic purposes and is meant to provide valuable background information on particular investments, NOT a recommendation to buy. The investments referenced within this article may currently be traded by Henssler Financial. All material presented is compiled from sources believed to be reliable and current, but accuracy cannot be guaranteed. The contents are intended for general information purposes only. Information provided should not be the sole basis in making any decisions and is not intended to replace the advice of a qualified professional, such as a tax consultant, insurance adviser or attorney. Although this material is designed to provide accurate and authoritative information with respect to the subject matter, it may not apply in all situations. Readers are urged to consult with their adviser concerning specific situations and questions. This is not to be construed as an offer to buy or sell any financial instruments. It is not our intention to state, indicate or imply in any manner that current or past results are indicative of future profitability or expectations. As with all investments, there are associated inherent risks. Please obtain and review all financial material carefully before investing. Henssler is not licensed to offer or sell insurance products, and this overview is not to be construed as an offer to purchase any insurance products. |