Money For the Rest of Us

Should You Be Invested 100% Stocks Before and During Retirement? A Recent Study Says Yes

Jan 3, 2024

The podcast discusses the pros and cons of investing retirement assets 100% in equity, including half in international stocks. It challenges the 4% spending rule and explores alternative strategies. The hosts emphasize the need for diversification and reliance on broader data. They compare various retirement investment strategies and highlight the risks of relying solely on US data. The importance of optimal spending rates, international diversification, and cautiousness with studies is also discussed.

25:29

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Quick takeaways

Investors should consider being 100% invested in stocks, including 50% domestic and 50% international stocks, as it can outperform age-based stock strategies and support retirement goals.

Using a broader database that includes 38 developed market countries from 1890 to 2019, it has been found that a 100% stock portfolio with 50% domestic and 50% international stocks produces higher average retirement wealth and reduces the probability of retirement ruin compared to traditional strategies.

Deep dives

Challenging Life Cycle Investing Tenets

The podcast episode discusses a recent study that challenges two central tenets of life cycle investing. The authors argue that investors should be 100% invested in stocks rather than diversifying across stocks and bonds. Furthermore, they argue that this approach should be maintained even during retirement. The study finds that an even mix of 50% domestic stocks and 50% international stocks outperforms age-based stock strategies in building wealth, supporting retirement consumption, preserving capital, and generating bequest.

Introduction

3min

Retirement Nest Egg Spending and Investment Strategies

6min

Comparing Investment Strategies for Retirement

9min

Examining Retirement Spending Rates and the Risks of Relying on US Data

3min

Spending Rates and Investment Behavior

6min

Personal Experience, Risk Tolerance, and the Importance of Being Cautious with Studies

3min

The pros and cons of investing your retirement assets 100% in equity, including half in international stocks. Why the 4% spending rule is too aggressive.

Why historical asset class return studies that use only U.S. data are biased
How researchers build a broader database to study retirement outcomes and spending rates
How a 100% stock portfolio performed compared to balanced portfolios and target date funds
Why investors should have half their assets in international stocks
Why a 4% spending rule is too high, and what is the alternative

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Show Notes

Beyond the Status Quo: A Critical Assessment of Lifecycle Investment Advice by Aizhan Anarkulova, Scott Cederburg, and Michael S. O'Doherty—SSRN

The Safe Withdrawal Rate: Evidence from a Broad Sample of Developed Markets by Aizhan Anarkulova, Scott Cederburg, Michael S. O'Doherty, and Richard W. Sias—SSRN

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