Direct answer: A healthy 65-year-old couple has roughly a 50% probability that at least one partner lives past 90, creating a potential 25-year planning horizon from retirement. Your portfolio must fund spending that far into the future while protecting against inflation, making equities a necessary long-duration component, not a risk to eliminate.
Time Horizons in Your 60s: Planning 30+ Years of Income
Why time horizon in your 60s is longer than most investors assume
The Social Security Administration life expectancy tables show that a 65-year-old man today has a median life expectancy near 84, and a 65-year-old woman near 87. For a couple at 65, the chance that at least one person reaches 90 is roughly 50%. A 60-year-old retiree may need to fund expenses for 35 years. This is longer than many investors spend accumulating assets, which fundamentally changes the risk calculation.
How long-horizon planning affects equity allocation in your 60s
A 35-year time horizon means that even investors in their early 60s need equities as an inflation hedge. A portfolio of only bonds loses purchasing power to 2% to 3% annual inflation over decades. A 50% to 60% equity allocation at age 60 is appropriate for many investors, shifting gradually toward 40% to 50% by age 70. The sequence-of-returns risk argument supports holding two to three years of spending in cash and short-term bonds as a buffer, not eliminating equities entirely.
How to use a bond ladder for the near-term spending horizon
A bond ladder covers the short and medium portion of your time horizon with a series of individual bonds or CDs maturing each year or each two years. Years one through five of spending needs are funded by ladder rungs, allowing equity holdings to recover from downturns without forcing you to sell. As each rung matures, you refill the far end of the ladder by selling equities during strong markets. This structure separates the need to spend from the volatility of your growth portfolio.
Frequently Asked Questions
How much equity should I hold at age 65?
There is no universal answer, but a 50% to 60% equity allocation at 65 is consistent with a 25 to 30-year spending horizon. Rule-of-thumb formulas like "100 minus your age" produce an allocation of 35%, which many planners consider too conservative for a 30-year horizon. Your actual allocation should reflect your spending flexibility, other income sources (Social Security, pensions), and personal comfort with volatility.
What is the risk of holding too few equities in retirement?
Holding too few equities increases longevity risk: the risk of outliving your money. A portfolio of only bonds or cash, earning 4% to 5% nominal, may not outpace a 3% inflation rate and a 4% to 5% withdrawal rate simultaneously over 30 years. Historical data shows that a 60% equity/40% bond portfolio has a higher probability of supporting a 4% real withdrawal over 30 years than a 30% equity/70% bond portfolio.
Should I plan for a 25-year or 35-year retirement?
Plan for the longer horizon unless you have strong health reasons not to. Planning for 25 years and reaching year 27 without resources is catastrophic. Planning for 35 years and spending less than needed gives heirs or charity a bequest. The asymmetry strongly favors the longer planning horizon. Social Security delayed to 70 effectively functions as longevity insurance, increasing guaranteed income for every year you live past breakeven.