Time Horizons for Investors in Their 70s

Why Plan to Age 90 or 95

Average life expectancy at age 70 is roughly 85 for women and 83 for men, but these are midpoints. About half of 70-year-olds will live past those ages. For a married couple both age 70, the probability that at least one person lives to age 90 is approximately 50%. Planning to average life expectancy means you have a roughly 50% chance of outliving your money.

Using age 90 or 95 as the endpoint creates a margin of safety. If markets cooperate and spending stays within plan, extra funds are a legacy benefit, not a problem. If markets underperform or health costs rise, the buffer matters.

The 3-Bucket Framework

The 3-bucket framework divides your assets by time horizon:

Bucket 1 (0 to 2 years): Cash and cash equivalents, such as a high-yield savings account or money market fund. Covers roughly two years of spending. Replenished annually from RMDs, Social Security, or bond interest. Protects you from forced stock sales in market downturns.

Bucket 2 (2 to 10 years): Bonds, CDs, or other lower-volatility assets. These mature or generate income over the medium term and eventually replenish Bucket 1.

Bucket 3 (10-plus years): Diversified stocks, including index funds. This bucket has time to recover from market downturns and provides inflation protection over the long horizon.

The exact allocation depends on your spending rate, income sources, and risk comfort, but the framework clarifies why stocks remain appropriate even in your 70s given a 20-plus-year horizon.

Inflation Risk Over 20 Years

At 3% average annual inflation, purchasing power falls by roughly 45% over 20 years. A retiree who holds only bonds and cash will find that their fixed income buys significantly less in their late 80s than it did at 70. Stocks have historically provided inflation protection over long periods, which is why some equity exposure remains important even for investors in their 70s.

Inflation also affects specific retirement costs differently. Healthcare costs have historically risen faster than general inflation, so the real cost of medical care tends to increase as a share of spending over a long retirement.

Sequence-of-Returns Risk and the Cash Buffer

Sequence-of-returns risk describes the damage that a large market decline early in retirement can cause, even if long-term average returns are adequate. If you sell stocks at depressed prices to fund spending, you deplete shares permanently rather than waiting for recovery.

The two-year cash buffer in Bucket 1 is the primary defense. By covering near-term expenses from cash rather than stocks during a downturn, you avoid forced selling. The buffer also provides psychological stability, reducing the chance of making poor decisions under stress.

Annual Rebalancing

Once a year, review your asset allocation against your target. If stocks have risen significantly, trim back to your target and move proceeds into Bucket 1 or Bucket 2. If stocks have fallen, allow Bucket 2 to replenish Bucket 1 and let Bucket 3 recover before rebalancing back toward equity targets.

Related guides: Risk Capacity and Risk Tolerance in Your 70s, Annual Review Checklist

Frequently Asked Questions