Don't Let a 60/40 Portfolio Derail Your Retirement: Why a Cookie-Cutter Approach Could Cost You

Choosing a personalized retirement investment plan, rather than relying on the old-school 60/40 portfolio, could help protect your savings and ensure long-term growth.

By Joe F. Schmitz Jr., CFP®, ChFC®, CKA®

published 24 January 2026

in Features

Many retirees tell me the same thing: "Joe, I don't want to check the market every day, and I don't want to make a stupid mistake."

Our clients — hardworking, frugal, diligent savers — do not want to jeopardize their past 30 to 40 years of hard work and sacrifice. Yet, many retirees I talk with are unknowingly taking more risk than they ever intended, which is why the old-school, cookie-cutter 60/40 portfolio is encouraged to maintain a balance between protection and growth.

The problem is that the 60/40 portfolio may not be as personalized and could even be taking on more risk than you want.

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What got you here won't get you there

During your career, you're in the accumulation phase. You're working hard, saving diligently and climbing the mountain slowly but surely. You have the time, income and flexibility to ride out the market ups and downs, but in retirement, you enter a new stage called the distribution phase.

The first five to 10 years of your retirement are known as the "fragile decade," and one wrong step can lead to a fall that is much harder to recover from.

Imagine you're playing football:

You're up by 7 points, fourth down, on your opponent's 20-yard line, with two minutes left. The win is right in front of you.
Do you throw a risky pass into the end zone?
Or do you kick the field goal, protect the lead and finish strong?

Retirement investing is the same concept. You've won the game. Protect the lead.

About Adviser Intel

The author of this article is a participant in Kiplinger's Adviser Intel program, a curated network of trusted financial professionals who share expert insights on wealth building and preservation. Contributors, including fiduciary financial planners, wealth managers, CEOs and attorneys, provide actionable advice about retirement planning, estate planning, tax strategies and more. Experts are invited to contribute and do not pay to be included, so you can trust their advice is honest and valuable.

Why time matters more than anything

Think of a tape measure stretched to 90 inches. That represents your potential lifetime.

At age 25, you're only a quarter of the way in and may have 65 years or so ahead of you. If markets fall, you have time to recover.
At age 60, you're much closer to the end of the tape. If markets drop 20% and you're taking withdrawals, you may not have time to rebuild. That's why risk must be handled differently in retirement.

The "set it and forget it" methods from your working years may no longer serve you well.

The bucket strategy: A simple way to invest in retirement

To make investment planning easier, we consider a two-bucket strategy for many of our clients:

1. The Protection Bucket

Money in this bucket should not lose value when the stock market drops. Its job is to ensure:

Stability
Predictability
Moderate growth to keep up with inflation

This bucket may include:

These may not be the flashiest or highest-return products out there, but some people say you cannot put a price on peace of mind.

2. The Growth Bucket

This bucket focuses on long-term growth using diversified investments such as:

ETFs
Index funds
Large-, mid- and small-cap stocks
U.S. and international companies
Value and growth strategies
Sector diversification (e.g., health care, technology)

The goal is to have hundreds of companies represented so one failure does not sink the ship. This structure allows retirees to enjoy the upside of the market without risking their entire nest egg.

Why the 60/40 portfolio falls short

For decades, retirees have been told that a 60% stock and 40% bond portfolio creates the "right" balance of growth and protection, but here's the uncomfortable truth: Bonds (which are recommended for the protection side of the plan) are not always safe.

From August 2020 to October 2022, BND, a major bond index, fell nearly 20%. If you had $500,000 in "safe" bonds during that period, you would have lost $100,000.

That's why we often restructure this portion of a portfolio, aiming for similar or better long-term returns with less downside risk than traditional bonds.

Real clients, real allocations

Now, the next question is, do we need 40% protected, or can we seek more growth? Well, that depends on your situation, but if you are a diligent saver or have a pension, then you may want to rethink this. (You also might want to check out my article If You're in the 2% Club and Have a Pension, the 60/40 Portfolio Could Hold You Back.)

Here are three examples that show what this looks like in practice:

Family No. 1: Pension + Social Security + $1.2 million saved

Income needed: $80,000
Pension + Social Security: $110,000
Protection bucket: $200,000
Growth bucket: $1 million

Family No. 1's pension and Social Security are their protection bucket. They could take zero risk if they wanted, but they wanted an emergency fund to tap in case they incurred any large expenses over the next five to 10 years.

Family No. 2: No pension + $5 million saved + high-income needs

Income needed: $150,000
Social Security: $70,000
Protection bucket: $800,000 (10 years of income)
Growth bucket: $4.2 million

This family is concerned about sequence of returns risk, so they prefer more protection. A 60/40 portfolio would have placed $2 million in bonds, needlessly limiting their growth.

Their custom plan protects what matters while still allowing meaningful long-term growth.

Family No. 3: No pension + $1 million saved

Income needed: $110,000
Social Security: $70,000
Protection bucket: $400,000 (10 years of income)
Growth bucket: $600,000

This is where the 60/40 model could make a lot of sense, but instead of bonds, we may look to be more strategic with the vehicles used.

Do you have a plan or just a portfolio?

A portfolio is a collection of investments. A plan is a strategy with purpose.

It considers:

Risk tolerance and risk capacity
Time horizon
Income needs
Pensions or Social Security
Tax planning
Long-term and legacy goals

We always tell our clients that there is no perfect investment, but there is a plan built specifically for your situation that can optimize your decision.

That's why blindly following cookie-cutter approaches, such as a 60/40 portfolio, can leave you overexposed, underprotected or missing opportunities.

The bottom line

Retirement isn't about beating the market; it's about making your savings last and helping you live the life you've earned, without unnecessary stress.

If you're like the people we work with, a pensioned public servant or a "Midwestern Millionaire" who saved your way to financial freedom, you deserve a plan that will protect your life's hard work.

A cookie-cutter portfolio can't do that, but a personalized plan can.

Disclaimer

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

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Joe F. Schmitz Jr., CFP®, ChFC®, CKA®, is the founder and CEO of Peak Retirement Planning, Inc., which was named the No. 1 fastest-growing private company in Columbus, Ohio, by Inc. 5000 in 2025. His firm focuses on serving those in the 2% Club by providing the 5 Pillars of Pension Planning. Known as a thought leader in the industry, he is featured in TV news segments and has written three bestselling books: I Hate Taxes (request a free copy), Midwestern Millionaire (request a free copy) and The 2% Club (request a free copy).

Investment Advisory Services and Insurance Services are offered through Peak Retirement Planning, Inc., a Securities and Exchange Commission registered investment adviser able to conduct advisory services where it is registered, exempt or excluded from registration.