All NewsSeptember 30, 2026

Retirees’ safest move raises the risk of hitting $0

A study published in the Journal of Financial Planning found that the move most retirees consider their safest, loading up on bonds and cash, is the one most likely to leave them running out of money.

Today’s math looks different when money needs to survive 25 to 30 years of withdrawals, rising health care costs, and annual inflation.

Bond-heavy portfolios can’t keep pace with 30-year withdrawals

The widely cited 4% withdrawal rule, established in William Bengen’s 1994 research for the Journal of Financial Planning, assumes a portfolio balanced roughly evenly between stocks and fixed income over a 30-year horizon.

Retirees who tilt heavily toward bonds strip out the growth engine that makes that withdrawal rate sustainable, according to Fidelity.

Morningstar’s State of Retirement Income report sets the safe starting withdrawal rate for 2026 retirees at just 3.9% of their total balance. That figure already sits below the traditional 4% benchmark and assumes the portfolio maintains a meaningful share in equities.

Retirees whose portfolios lean more heavily toward bonds than a balanced 50/50 mix may find that a 4% starting withdrawal rate is unsustainable, the Motley Fool warned.

Financial advisors who once told clients to sharply cut equity exposure at retirement now recommend maintaining a much larger share of stocks, with most planners suggesting 40% to 80% in equities to generate income while mitigating inflation and longevity risks, CNBC reported.

A retiree whose essential expenses are covered by Social Security or a pension has more room to keep equities working inside the portfolio.

ALSO READ: Retirement portfolios need fixed income playbook reset

Why financial planners now reject the old conservative rule

The traditional rule of thumb instructed new retirees to slash stock exposure to roughly 30% of their portfolio the moment they left the workforce. That advice was built for a generation expecting roughly 12 to 15 years in retirement.

Higher equity allocations in retirement represent a departure from old planning assumptions, Cheri Belski, head of investment management solutions at LPL Financial, explained to CNBC.

There’s no single target allocation that fits every individual, and the appropriate mix depends on account age, risk tolerance, income, assets, spending needs, and taxes, Belski said.

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Target-date retirement funds reflect this gradual shift in practice. Vanguard’s funds, for instance, continue to reduce equity exposure for 10 to 20 years after the target retirement date but never eliminate stocks entirely, Belski noted.

Retirees intending to leave money to heirs effectively extend their investing time horizon and may warrant a more growth-oriented position, Matt Gentzkow, managing director and wealth advisor at Coastal Bridge Advisors, told CNBC.

Belski also said that the exercise becomes especially urgent for retirees whose nest eggs need to last 30 years or more.

Retirement investing is shifting as longer lifespans challenge traditional stock allocations and force retirees to rethink how long their portfolios must last.

Jacob Wackerhausen / Getty Images

Inflation and health care costs multiply the problem

Conservative portfolios fail over long retirements because two compounding forces work against fixed-income returns every year: inflation and rising medical expenses.

Chandler Riggs, a financial consultant and vice president at Fidelity Investments, told Kiplinger that inflation steadily works against retirement purchasing power over time.

<strong>Inflation doesn’t destroy a portfolio overnight; it erodes it slowly</strong>.

A retiree’s savings may appear steady on paper, but each dollar loses purchasing power over time when the portfolio fails to outpace inflation.

Sequence-of-returns risk compounds the danger, Riggs noted in the same Kiplinger interview. A retiree who pulls money out of a declining portfolio locks in those losses permanently, shrinking the balance so much that it may never fully bounce back.

National health spending will grow by 5.4% annually through 2034, outpacing projected GDP growth of 4.1%, the Centers for Medicare and Medicaid Services (CMS) projects.

The average retired couple will need an estimated $371,000 (after tax) to cover lifetime medical expenses, excluding long-term care, Fidelity reported.

The comparison every retiree should run before locking in an allocation

Retirees who measure their portfolios against decades of future withdrawals gain a clearer picture of their financial trajectory, Belski recommended, because the exercise forces a comparison between what a conservative allocation produces and what decades of compounding inflation and medical costs demand.

Waiting too long to run that comparison risks uncovering the shortfall only after conservative returns have already fallen behind rising expenses.

Pairing equity exposure with a cash buffer for one to two years of expenses gives retirees room to absorb market downturns without selling stocks at depressed prices, Christine Benz, Morningstar’s director of personal finance and retirement planning, recommended to CNBC.

The gap between current allocation and the returns needed to exceed inflation is each retiree’s most critical number, Fidelity found.

Related: Social Security’s biggest check locks out most retirees