If Not a 60/40 Portfolio, Then What?
As the tried-and-true method struggles amid a weak bond market, strategies such as fixed-index annuities and buffer ETFs could help you weather difficult times.


The day you retire can be a time of excitement.
It can also be a time of anxiety.
One of the most difficult decisions we face in life involves determining when it’s time to retire. The thought of telling your employer that, after a certain date, you won’t be coming back for another paycheck is nerve-racking. Numerous questions pop into your mind.

Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Do I have enough saved?
Will my nest egg last?
What happens if I get sick?
What if the stock market tanks?
The list goes on.
Far too many people approach retirement with no answers to these questions. Instead, their plan relies on hope — hoping they saved enough, hoping their money doesn’t run out, hoping their health holds up, hoping the market won’t suddenly drop.
Proper Planning Can Help Alleviate Stress
Approaching retirement is much less stressful if proper planning is put in place. Those fearful questions above should all be answered well in advance of retirement, leaving no doubt about the answers.
Over time, of course, the answers may change. Many of the people we meet who are approaching retirement are invested in a 60/40 portfolio, which translates to a mix of 60% equities and 40% bonds. That approach, once considered a tried-and-true method for retirement security, doesn’t work as well these days, especially with a weak bond market that doesn’t hold up its end of the bargain because of rising interest rates. As of this writing, the S&P is down 16% YTD, Nasdaq is down 29%, and bonds are down 13%. A 60/40 portfolio is hemorrhaging.
The good news is there are ways you can structure your portfolio so it will perform well when times are good, but also will help you weather difficult times so you don’t crash along with the market. Today, more than ever, it is important to structure a retirement portfolio that focuses on defense first and offense second.
A Variety of Tools Can Offset Risk When Times Are Tough
It is also vital that the portfolio be adjusted regularly to take advantage of opportunities and to avoid potential pitfalls. While passive investing may work over long periods of time, a more active management approach works better for individuals who are retired or are approaching retirement.
Using a variety of derivative-based tools can be helpful to offset risk in tough times. These tools employ option-based strategies to predetermine the range of potential results. A couple of options that do that are:
Fixed-index annuities. People have plenty of preconceived ideas about annuities, many of which are wrong. Annuities can be a great tool when used correctly and can be an excellent alternative to bonds in your portfolio.
At my firm, we make use of fixed-index annuities, and there are three ways in which they can be leveraged to benefit you: as an accumulation tool, an income tool and a long-term care insurance tool. Let’s look at each of them.
- First, as an accumulation tool, a fixed-index annuity allows you to earn interest based on a stock market index, such as the S&P 500. But there is also downside protection because you can’t lose your principal. If the market goes up, you do well. If it goes down, at worst, you break even.
- Second, as an income tool, when you go into retirement, your annuity can be used to buy what essentially is a pension, paying you an amount every month for the remainder of your life. This can bring some sense of relief for those who worry about running out of money in retirement.
- Finally, you can also include a long-term care rider for your annuity so that it will help pay for long-term care services should you ever need them.
Buffer exchange-traded funds. These also can be beneficial for investors whose concerns about losing money are greater than their aspirations for achieving extraordinary gains. Buffer ETFs minimize some of the market risks, but still allow for growth through put and call options.
With these ETFs, you buy an underlying asset that is also tied to an index, such as the S&P 500. Returns are typically capped at a certain percentage, but a “buffer” is built in that absorbs some of your losses. For example, the buffer might be set up to absorb a 15% loss. In that case, if your ETF is tied to the S&P 500 and it was to drop 18%, your loss would be 3%. The buffer is created by purchasing a put option that gives you the right to sell its exposure if the index declines in value.
Of course, regardless of how you build your portfolio, you or your financial professional should not just create a retirement plan and think you are done. You can’t assume that what works well today will work just as well next year or five years from now.
Circumstances change. Your personal needs change. The overall economy changes. I regularly update clients’ plans and make tweaks as their needs shift or as events — such as ridiculously high inflation rates — require it.
That’s why it’s worthwhile to have someone in your corner as you plan for and enter retirement. The right financial professional can answer all of your questions and maybe even help you find the answers to questions you would have never known to ask.
Ronnie Blair contributed to this article.
Index or fixed annuities are not designed for short-term investments and may be subject to caps, restrictions, fees and surrender charges as described in the annuity contract.
The appearances in Kiplinger were obtained through a PR program. The columnist received assistance from a public relations firm in preparing this piece for submission to Kiplinger.com. Kiplinger was not compensated in any way.
Investment advisory services offered through Brookstone Capital Management, LLC (BCM), a registered investment advisor. BCM and First Coast Financial Group Inc. are independent of each other. Insurance products and services are not offered through BCM but are offered and sold through individually licensed and appointed agents.
Any comments regarding safe and secure products, and guaranteed income streams refer only to fixed insurance products. They do not refer, in any way, to securities or investment advisory products. Fixed Insurance and Annuity product guarantees are subject to the claims-paying ability of the issuing company and are not offered by Brookstone Capital Management.
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

Bill Aldrich is president of First Coast Financial Group. He is a financial adviser and is insurance licensed in multiple states. Aldrich earned his Chartered Life Underwriter (CLU®) designation and has a bachelor’s degree in mathematics from the University of North Florida. He got his start in the industry in 1986, working for a local financial services firm. He co-founded First Coast Financial Group in 2004 to focus on helping clients make informed financial decisions consistent with their goals for retirement, estate and business planning.
-
Can President Trump Fire Fed Governor Lisa Cook?
Markets hate uncertainty, especially when it comes to monetary policy and interest rates, and questions about the Fed are compounding.
-
Will You Get a ‘Surprise’ Tax Bill on Your Social Security Benefits in Retirement?
Retirement Taxes Social Security benefit payments might land you in hot water when filing 2025 taxes — here are three reasons why.
-
I'm a Wealth Adviser: If You're a DIY Investor, Don't Make These Five Mistakes
Even though you may feel confident because of easy access to investing information, you may be making mistakes that could compromise your long-term performance. Here's what you should know.
-
Building a Business That Lasts: The Critical Steps to Avoid Blunders
'Another Way' author David Whorton offers advice on how to build an 'evergreen' business that endures by avoiding common pitfalls that can lead to failure.
-
I'm a Financial Pro: Why You Shouldn't Put All Your Eggs in the Company Stock Basket
Limit exposure to your employer's stock, sell it periodically and maintain portfolio diversification to protect your wealth from unexpected events.
-
How Will the One Big Beautiful Bill Shape Your Legacy?
The One Big Beautiful Bill Act removes uncertainty over tax brackets and estate tax. Families should take time to review estate plans to take full advantage.
-
Should You Claim Social Security Early or Late? A Financial Adviser Weighs In
There isn't a wrong age to start claiming Social Security, but there are factors that everyone should consider to avoid leaving money on the table.
-
Three Things Financially Confident People Do, From a Pro Who Knows
If you have any worries about your retirement future, take back control with these three tips.
-
How Much Do I Need to Retire? A Financial Professional Breaks Down Your Options
What it all boils down to is will you be comfortable in retirement? Some people may rely on formulas, while others just aim for $1 million nest egg.
-
Despite Our Grumbles, America Still Delivers on the Dream: Perspective From a Financial Pro Who's Seen Stuff
Some of us might complain about the state of our nation (and those concerns are legit), but America still offers unparalleled opportunities and mobility that many people around the world only dream about.