Don’t Fear Stocks in Retirement

When it comes to retirement planning, one of the most widely accepted beliefs is this: the older you get, the fewer stocks you should own. It’s a principle that’s been taught for decades—gradually shift from equities to bonds or other “safe” assets as you age, especially in retirement. The goal? Reduce exposure to volatility and preserve your hard-earned savings.

But what if that advice, while well-intentioned, is actually incomplete?

At Lucia Capital Group, we believe it’s worth challenging this conventional wisdom. In fact, we’ve seen that a reverse approach—owning more stocks later in retirement—may offer greater financial security for many retirees. It all depends on how you manage your withdrawal strategy and structure your investment plan.

Here’s why the traditional model might fall short—and what you can do instead.

The Conventional Glidepath: Decreasing Equity Exposure

The traditional retirement strategy is built around something called a declining equity glidepath. The idea is simple: reduce the risk in your portfolio as you age by slowly shifting from stocks to bonds or cash equivalents.

For example, someone who retires at 65 might start with a 60/40 stock-to-bond allocation, then gradually move to 40/60 or even 20/80 as they reach their late 70s or 80s. The thinking is that as you get older, you have less time to recover from market downturns, so the safer the investments, the better.

There’s some logic to this, especially leading up to retirement. Market volatility in the years just before or after you stop working can have a disproportionately large impact on your future income—a risk known as sequence of returns risk. So, reducing stock exposure near your retirement date can help protect you from that early negative shock.

But Then Everything Changes

Here’s where the traditional model often misses the mark: once you actually retire and begin drawing income from your portfolio, the rules of the game start to shift.

According to research from financial planner and retirement expert Michael Kitces, sticking with a low equity allocation throughout retirement can increase the probability of running out of money. His studies show that retirees might benefit more from doing the opposite of what conventional wisdom suggests—starting with a lower equity allocation and then increasing it over time.

This approach is called a rising equity glidepath.

What Is a Rising Equity Glidepath?

A rising equity glidepath starts retirement with a more conservative mix—something like 30% stocks and 70% bonds or other stable assets. Then, instead of reducing equity exposure over time, you gradually increase it, potentially ending up with as much as 70% in stocks in your later retirement years.

Why would anyone want to own more stocks at age 80 than at 65?

Because it turns out that having access to growth in your portfolio may be more important later in retirement than at the beginning. Most retirees will face 25 or 30 years of spending, and if your portfolio is too conservative, it may not keep pace with inflation—or grow enough to sustain your lifestyle in your later years.

In Kitces’s findings, this rising equity approach can improve portfolio longevity, reduce the chance of failure, and help retirees maintain their purchasing power. It’s a strategy that aligns your asset allocation with your actual withdrawal pattern and the evolving risks of retirement.

How to Implement It: The Bucket Strategy®

One practical way to implement a rising equity glidepath is through something we call The Bucket Strategy®.

Instead of looking at your portfolio as one big pot of money, we break it into distinct “buckets” based on time horizon and purpose:

• Bucket 1: Short-term needs. This is where you keep your cash and ultra-safe investments—enough to cover your living expenses for the next 1 to 3 years. It’s designed to provide peace of mind and predictability.
• Bucket 2: Mid-term income. This bucket might include a diversified mix of bonds and conservative investments designed to generate income over the next 5 to 10 years.
• Bucket 3: Long-term growth. This is where your equities live. It’s your long-term engine, left mostly untouched for the first decade or so of retirement. Over time, as you draw down Buckets 1 and 2, this bucket becomes a larger percentage of your overall portfolio.

By using your conservative assets first, you naturally increase your equity exposure over time—without having to sell stocks during downturns. That’s the key. This rising glidepath happens organically, just by the way you spend.

Why It Works: A Real-World Perspective

Imagine this scenario: you retire at 65 with $1 million, allocating 30% to stocks and 70% to bonds and cash. You withdraw $40,000 per year from your conservative buckets (1 and 2), leaving your stock bucket untouched.

Over the next 10 to 15 years, even if markets fluctuate, your stocks have time to grow. If markets perform well, great—you’ve potentially built more wealth. If markets struggle, you’ve avoided selling during the downturns and may benefit from long-term recovery.

By year 15, your withdrawals have reduced your bond and cash holdings, and stocks now represent a larger portion of your remaining portfolio—perhaps 60–70%. At that point, your growth assets are better positioned to sustain you through your 80s and 90s, when inflation and longevity risks become more pressing.

It’s a disciplined, rules-based way to give yourself time, protection, and growth—the holy trinity of retirement income planning.

The First 10–15 Years Are Critical

Why is this strategy so powerful? Because the first 10 to 15 years of retirement often set the tone for everything that follows.

Retirees who experience poor market returns early on—and are forced to sell stocks to fund their lifestyle—may lock in losses and permanently impair their portfolios. But if you use a strategy that allows you to draw income from conservative assets first, you can avoid selling stocks at a loss, giving your portfolio a much better chance to recover and thrive.

And if the market does well in those early years? You’re ahead of the game.

No Guarantees—Just Better Odds

Of course, no strategy is perfect or guaranteed. Markets are unpredictable. Life is full of surprises. But the goal of a well-structured plan is not to eliminate uncertainty—it’s to help you navigate it with confidence.

That’s what we aim to do at Lucia Capital Group. The Bucket Strategy® is designed for real people facing real-life decisions—not just spreadsheet scenarios. It’s a framework that prioritizes flexibility, sustainability, and clarity, no matter what the market is doing.

Is a Rising Equity Glidepath Right for You?

It might be. But it depends on your goals, risk tolerance, time horizon, and income needs. Like any financial decision, it should be part of a broader strategy tailored to your life.

At Lucia Capital Group, we’re here to guide you through those decisions—whether you’re five years from retirement or already in it.

So if you’re wondering how to structure your retirement income, how to balance growth and safety, or how to make sure you don’t run out of money, we’d love to talk.

Let’s build your bucket plan together.