The Retirement Death Spiral [Part 1 of 2]

A common retirement portfolio is built on a 60/40 split.

60% stocks.
40% bonds.

For decades, this was considered the "safe" way to retire.

The idea was simple.

When stocks went down, bonds would help protect you.

All good, right?

The problem is that the stock-bond relationship the 60/40 mix depends on is less reliable than it looks. For most of the last century, stocks and bonds tended to move together. The two decades after 2000, when bonds reliably rose as stocks fell, were the exception. That relationship broke down in 2022, when inflation and interest rates rose.

(You can read more about that in the report, "The Bond Myth," HERE.)

And that creates a much bigger problem.

In my experience, many retirement portfolios don't produce enough income to cover a retiree's spending when the market drops or expenses rise.

So where does the money come from?

They sell a piece of the portfolio.

At first, it's not a big deal.

Planned withdrawals are a normal part of retirement. The trouble starts when withdrawals are too large, or when you're forced to sell after the market has fallen.

But every piece sold is one less piece generating future income and growth.

The portfolio gets smaller.

The income gets smaller.

And eventually, the retiree has to sell even more just to maintain the same lifestyle.

Now they're in a death spiral.

I see it more often than you might think.

The good news?

There is another way.

It's not new. Large university endowments, for example, rely far less on bonds than a 60/40 portfolio does. In fiscal year 2025, U.S. college and university endowments held about 11% of their assets in fixed income, on a dollar-weighted basis.¹ Their situation is different from a retiree's: they plan to exist forever, and they can access investments most individuals can't. In Part 2, I'll explain the approach, including its risks and who it doesn't fit.

¹ Source: 2025 NACUBO-Commonfund Study of Endowments (657 institutions, fiscal year 2025), dollar-weighted asset allocation.

DISCLOSURE: Prepared by Jones Fiduciary Wealth Management, LLC ("JFWM"), a registered investment adviser (CRD #311956), for informational and educational purposes only. Nothing herein constitutes investment, legal, or tax advice or a solicitation to buy or sell any security. All investments involve risk, including possible loss of principal. Past performance is not indicative of future results. Individual circumstances vary; consult a qualified professional before acting on any information. Views are those of JFWM as of the date published and subject to change.