The Rising Equity Glidepath: Why Increasing Risk in Retirement Is Safer
The Rising Equity Glidepath: Why Increasing Risk in Retirement Is Safer
COACHING POINTS
- The Conventional Wisdom: “Age = Bond Percentage.” As you get older, you should own fewer stocks to reduce risk. This “Declining Glidepath” is standard Target Date Fund logic.
- The Counter-Intuitive Truth: Research by Kitces & Pfau proves the opposite. To survive a 30-year retirement, you should start with low equity (e.g., 30%) on the day you retire to block “Sequence of Returns Risk,” and then increase equity (to 60-70%) as you age.
- The Mechanism: This “Rising Glidepath” works by spending down your safe assets (Bonds/Cash) first. As the bond pile shrinks, the remaining stocks naturally become a larger percentage of the portfolio, fighting inflation in your later years.
Retirement planning is a war on two fronts: Market Crashes (short-term) and Inflation (long-term). A high-stock portfolio fails the first war (SORR). A high-bond portfolio fails the second war (Purchasing Power). The Rising Equity Glidepath wins both. It acts like a shield wall that starts thick (Bonds) to survive the initial assault of retirement, then slowly transitions to a spear (Stocks) to secure longevity. Source: Journal of Financial Planning / Kitces & Pfau Research
Scenario: You have $1M. You need $40k/year. Retirement Day Allocation: 30% Stock / 70% Bond.
- Years 1-10 (The Danger Zone):
You withdraw solely from the Bond/Cash side.
Market Crash? Who cares. You didn’t sell a single stock. Your stocks sit there, dividends reinvesting, waiting for the recovery. - Years 11+ (The Recovery):
Since you spent the bonds, your portfolio is now mathematically heavier in stocks (e.g., drifted up to 60%).
Result: You now have high equity exposure to generate the growth needed to pay for healthcare and inflation at age 85.
Portfolio Success Rate (30 Years)
| Strategy | Survival Probability (0-100) |
|---|---|
| Static 60/40 (Fixed) | 85 |
| Declining Glidepath (Starts High, Ends Low) | 70 |
| Rising Glidepath (Starts Low, Ends High) | 95 |
*Starting conservative and getting aggressive later is statistically the safest way to navigate retirement.
What-If Scenario: The 2000-2010 Decade
Comparison: Retiring into the Dotcom Crash + 2008 Financial Crisis.
| Year into Retirement | Standard Portfolio ($) | Rising Glidepath ($) |
|---|---|---|
| 0 | 100 | 100 |
| 5 (Post-Crash) | 75 | 90 |
| 15 (Recovery) | 85 | 110 |
Execution Protocol
5 years before retirement, stop reinvesting dividends and stop buying stocks. Direct all new contributions to Bonds/Cash. Your goal is to reach your peak conservative allocation (e.g., 40% Stock / 60% Bond) on the day you quit.
In early retirement, sell bonds to fund your life. This naturally increases your stock allocation percentage over time without you having to “buy” stocks. It is a passive glidepath.
Don’t let stocks go to 100%. Set a ceiling (e.g., 70% or 80%) where you stop the drift and start rebalancing. At age 85, you still need some stability, but you need growth more than a 65-year-old does.
COACHING DIRECTIVE
- Do This: Use this strategy if you are terrified of a market crash right after you retire. It is the mathematical antidote to “Sequence of Returns Risk.
- Avoid This: blindly following “Age in Bonds” rules. Buying more bonds as you get older guarantees that your purchasing power will eventually be strangled by inflation.
Frequently Asked Questions
Is this market timing?
No. Market timing is predicting when a crash will happen. The Rising Glidepath assumes a crash could happen early, so it insures against that specific window (the Red Zone) regardless of market forecasts.
Psychologically, can I do this?
It is hard to hold more stocks at age 80 than at 60. However, at age 80, your time horizon is shorter (statistically), but your portfolio’s time horizon (for heirs/spouse) is still long. The “Bond Tent” depletion feels natural because you are spending cash.
Does this work with the 4% Rule?
Yes. In fact, it allows for a slightly higher initial withdrawal rate (e.g., 4.5%) because the downside risk of the early years is hedged by the heavy bond allocation.