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Right or Wrong Thumbnail

Right or Wrong

Is the 60/40 portfolio right for you?

Forty years ago, in 1982, I got my start working in the financial services industry with Smith Barney in downtown Seattle. That was the same year that corporations realized, after reviewing paragraph (k) of section 401 of the IRS code, that they could stop saving for employees’ retirements through defined benefit plans.

You can guess what followed. Company after company initiated 401(k) plans, resulting in a colossal shift of responsibility for retirement savings off their own backs, and onto the backs of employees.

In the four decades that followed, many employees defaulted to a 60/40 stock-bond split within their 401(k) accounts, and it has served them well, as the two Wall Street Journal articles referenced last week.  

Not surprisingly, whenever there is a steep market decline, the financial press either criticizes the entire 401(k) plan structure or the 60/40 stock-bond allocation.

With that in mind, is the 60/40 portfolio right for you?

I can’t answer that, but your financial plan will.  

While we are at it, how is that financial plan of yours coming along? Earlier this year I referenced a study by Charles Schwab Inc., and carried out by Strategic Insights, that investors who have created a financial plan have 2.7x higher net worth on average at retirement.

What does your financial plan do for you?

  1. Your plan is the driver of your stock-bond allocation. It offers clarity on the amount of short-term volatility you and your portfolio can absorb today in pursuit of higher future returns.
  2. Confirms you are on track with your saving and spending, building confidence that your portfolio will sustain you later in life.  
  3. Nudges you to make small adjustments to your plan now that can have a significant impact later in life.
  4. Allows you to address the two big unknowns in retirement: unexpected healthcare costs and sequence of returns risk.
  5. Offers peace of mind that you can live your rich life in retirement without running out of money.

Start Planning Now     

I have spent my career building financial plans for clients that provide clarity and peace of mind while addressing the unknowns like healthcare costs and sequence of return risks. Connect with me in a short 30-minute strategy call, and let's discuss your portfolio, financial plan, and tax strategies to reduce taxes. With three Certified Financial Planners (CFP™) and a CPA on staff, Soundmark Wealth Management creates common-sense plans for over 300 families across the nation.