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Today I am taking a moment to talk about why the old 60/40 portfolio is fading away and what retirees must do instead. For decades, it worked—until it did not. When stocks and bonds began falling together, the model proved what I have said for years: one-size-fits-all investment formulas fail the moment you retire. When couples operate as a single economic unit, income changes when a spouse dies, and housing plus healthcare costs never go backward. That is why bucketed assets, timing of withdrawals, and personal holistic wealth planning and management matter far more than academic theories built for institutions that never deal with children, grandchildren, cruising, sore knees, backs, mortality or Medicare. Alas, the real world is what it is.
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While I have long said the 60/40 efficient frontier is fine, it does not fit everyone — and blind faith in any single formula is always dangerous.
The one-size-fits-all approach collapses the moment you look at real-world retirees who must bucket assets, match income to life expectancy, and prepare for the reality that a married couple is a single economic unit. When one spouse dies, at least one Social Security check disappears. Income drops. Taxes often increase. Healthcare costs rise. Timing of withdrawals, sequencing risk, longevity risk, and medical risk all intertwine.
Institutional managers never account for these issues because they do not manage individual longevity, mortality, or personal healthcare realities. Their theoretical models ignore the human being who has to live on the outcome. That is why bucketing and timing are critical. And with that in mind, here is reality with context.
Why the 60/40 Portfolio Is Dying — and What Some Sophisticated Institutional Investors, Such as Sovereign Funds Are Doing Instead
For decades, the classic 60/40 portfolio — 60% stocks, 40% bonds — was the gold standard of disciplined investing. It was simple, repeatable, and, for a long time, effective. Investors set their allocation, rebalanced periodically, and slept well assuming bonds would rise when stocks fell.
That assumption no longer holds.
In 2022, stocks and bonds declined in unison as inflation surged and interest rates rose. A strategy built on negative correlation suddenly offered no protection at all. The old playbook had broken.
In response, many of the world’s largest and most sophisticated investors — Canadian pension giants CPP and OTPP, Australia’s Future Fund, New Zealand Super, and others — have largely abandoned rigid strategic asset allocation (SAA). They have adopted what is known as the Total Portfolio Approach (TPA).
Modern portfolio theory did more than popularize the 60/40 portfolio — it also became the backbone of today’s target-date funds. The problem is that target-date funds simply automate the same “set it and forget it” glide path by shifting from stocks to bonds on a preset schedule, regardless of market conditions, interest-rate cycles, inflation shocks, or personal circumstances. In other words, they inherit the same flaw: an unquestioned belief that bonds will always provide protection when stocks fall. As 2022 proved, that assumption can be catastrophically wrong. Target-date funds may be convenient, but convenience does not equal correctness, especially for retirees facing longevity, income sequencing, and healthcare realities that no glide path can predict.
What the Total Portfolio Approach Actually Means
Traditional SAA resembles a fixed football formation: each player has a prescribed position, and the coach rebalances to keep everyone in place regardless of how the game unfolds.
TPA is real-time coaching. The entire portfolio is treated as a single, dynamic system. Capital is deployed wherever the combination of expected return, risk, liquidity, and opportunity is most attractive at that moment. There are no sacred percentage targets for “stocks” or “bonds.” There are only goals — funding liabilities, beating inflation, preserving purchasing power — and every asset class competes on equal footing to help achieve them.
If toll roads in Asia or private credit in the U.S. offer better risk-adjusted prospects than public equities, money moves there. If government bonds suddenly become attractive again, capital flows back. Committees are no longer siloed by asset class; decisions are judged against the total portfolio’s objectives, not against arbitrary benchmarks.
Now let’s go back to football for context. If your wide receiver is having a breakout day and the cornerback across from him is clearly outmatched, a good coach does not stick to the original script — he keeps throwing the ball. If your defensive line is banged up and you know they cannot hold the line of scrimmage, you shift the game plan and run the ball more to take advantage of the opponents’ weakness. This is not fancy theory; it is common sense, real-time decision-making. The Total Portfolio Approach simply applies that same coaching mindset to wealth management: identify what is working, avoid what is failing, and position your capital where the opportunity is strongest at that moment.
Why the Shift Happened
Three forces converged:
1. A decade of near-zero interest rates destroyed bonds’ traditional role as both income provider and downside protector.
2. The 2021–2022 inflation shock proved that stocks and bonds can (and did) fall together.
3. Geopolitical fragmentation, supply-chain concentration, and technological disruption introduced new risks that static allocations were too inflexible to address.
Institutions that adopted TPA earlier weathered 2022 far better than peers wedded to 60/40.
Implications for Capital Flows
• Private markets (infrastructure, private equity, private credit) have become core holdings for institutional investors, rather than “alternatives.”
• True diversification is measured by correlation and factor exposure, not by labels.
• Liquidity is actively managed as a strategic asset; those who hold extra cash can move quickly when others are forced to sell.
Risks remain. When many large players use similar risk models, herding and crowded exits become possible. Yet on balance, TPA has proven more resilient than rigid buckets.
What This Means for Individual Investors
You do not manage hundreds of billions, but you can — and should — adopt the spirit of the Total Portfolio Approach through goals-based investing.
1. Define clear, prioritized goals: essential needs (food, housing, healthcare) come first; lifestyle desires second; estate aspirations last.
2. View your total wealth holistically: investment accounts + home equity + future Social Security or pension + human capital (earning power).
3. Abandon dogmatic percentage targets. Ask instead: “Does this investment improve my ability to fund my actual goals at an acceptable level of risk?”
4. Remain flexible. The world changes; your plan should too.
Note: This does not mean abandoning diversification or chasing every hot asset. It means refusing to let an arbitrary rule — “I must always own 60% stocks” — force you to hold overpriced assets or miss genuinely attractive opportunities.
We also have to be blunt about the world retirees are living in and stepping into, willingly or not. Global stability is not what it was a decade or two ago. The increasing volatility of violence, proxy conflicts, cyberattacks, and the very real possibility of a two- or even three-front confrontation involving China, Russia, and North Korea all have direct implications for markets, supply chains, commodities, and interest rates. Retirees who may have fewer than twenty years of longevity do not have the luxury of ignoring these risks. Retirement management and planning must acknowledge that geopolitical shocks can arrive quickly, hit hard, and disrupt traditional assumptions about safety, sequencing, and cash flow. This is not alarmism; it is responsible preparation.
For retirees especially, mental accounting (“bucket strategy”) still has merit when it prevents panic selling during downturns and matches cash flows to liabilities. But even those buckets should be filled thoughtfully, not mechanically.
The 60/40 era was comfortable while it lasted. Comfort, however, is a poor substitute for resilience. The most sophisticated investors on earth have moved on years ago. Individual investors would be wise to follow their lead — not by copying multibillion-dollar private-market deals, but by copying the mindset: clarity of purpose, flexibility of execution, and relentless focus on the total picture.
Clear eyes, adaptable plans, and vigorous writing — the new requirements for building wealth in an unpredictable world.
Institutional Theory - MPT
Now, if you are retired, you must remember one thing: institutional theory does not pay your bills — your income does.
Before we even discuss Modern Portfolio Theory, it is important to acknowledge who stood behind it. Harry Markowitz and William Sharpe were not salespeople, fund marketers, or Wall Street pitchmen — they were academically gifted economists who attempted to bring structure, mathematical discipline, and predictability to investing. Their work introduced the concepts of efficient diversification, risk-adjusted returns, and the idea that portfolios could be optimized through equations rather than instinct. Their contributions were significant enough to earn Nobel Prizes. That achievement alone ensured their theories would spread rapidly throughout universities, investment firms, and regulatory bodies. But as with many great ideas, the moment it reached the retail investor marketplace, the theory evolved into something very different from what they intended.
Markowitz and Sharpe reshaped the investment universe with Modern Portfolio Theory and the Capital Asset Pricing Model. Their work was elegant, mathematical, and persuasive enough to earn Nobel Prizes. Once that happened, the financial industry treated their formulas as gospel. What began as academic exploration became industry doctrine. And almost overnight, the theory was transformed into a universal sales script. If a model carried a Nobel Prize, who was going to question it? Certainly not the people using it to sell products.
But that is precisely the problem. The Nobel imprimatur gave every weak-sister salesperson disguised as an “investment advisor” a built-in crutch. Instead of understanding the individual retiree in front of them — the age, the spouse, the income timing, the longevity risks, the health shocks — they hid behind charts, curves, and frontier lines. They pushed portfolios the same way fast-food chains push combo meals: standardized, mass-produced, and easy for the sales force to memorize. The model became the message, and the message became an excuse not to think.
This is where retirees must be exceptionally careful. A theory is not a truth; it is not a law of physics. A theory is simply a structured belief — a way of interpreting data. And beliefs, whether financial or religious, rely on faith. You either have faith in the model, or you do not. But that faith does not make the model correct. Too often, financial theories are sold as if they are immutable facts, as if markets will always behave the way the equation predicts. Reality does not work that way. Markets shift. Risks evolve. Lifespans lengthen. Healthcare costs explode. Geopolitics intervene. The theory does not adjust itself for you; you must adjust for it.
Masquerading
And this is the critical point for retirees: faith-based thinking masquerading as fact is dangerous. When you accept a theory as truth, you stop questioning. You stop adapting. You stop planning for the world you actually live in. Modern Portfolio Theory was never designed for a retiree couple dealing with Social Security reduction, RMD timing, long-term care, Medicare surcharges, or a 15- to 20-year runway of longevity risk. Treating theory like scripture is how people lose money — slowly at first, then all at once. Real planning requires clarity, flexibility, and an understanding that theories are tools, not commandments. Your income, your timing, and your life do not fit into a Nobel Prize formula, and they never will.
Buckets of Clarity
Institutions never worry about the cost of a new roof, replacement of a hot water heater, ever increasing homeowner insurance premiums, vehicle repairs, bucket list desires such as traveling to Europe, bailing out an unemployed or divorced child or grandchild, a spouse dying, Social Security dropping, Medicare premiums rising, assisted-living costs exploding the budget, or the burden placed on the spouse with a cognitively declining partner. No, theories do not need to be concerned about real life events, but you do. That is why a bucketed, time-sequenced approach to income is not optional — it is survival.
Budgeting, bucketing, and timing withdrawals correctly will always matter more than any institutional model, academic paper, or theoretical frontier. For real people, in real retirement, the plan must be personal, practical, and built for longevity — not for Wall Street.
And so…
When it comes to investing, it always comes down to the sequencing of timing in, the length of time in, and the sequencing of timing out. Timing in is when your money goes to work. Time in is the length your money is working and growing for you. Timing out is when you pull money out to live on. And here is the part most people never hear — timing out is the one area where retirees have the greatest control, but only if one understands the rules, the buckets, and the importance of sequence. Everything else is noise. In the end, the solutions remain the same: make more, spend less, adjust your expectations, or do a combination of all three. And the reality is that most retirees end up using some blend of all three. Real retirement planning involves the management of one’s temperament.
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