You’re really 500% richer than you think if you are this 1 type of retiree. Start maxing out your wealth in 2026

You’re really 500% richer than you think if you are this 1 type of retiree. Start maxing out your wealth in 2026

Vishesh Raisinghani

Mon, December 22, 2025 at 8:00 AM EST

5 min read

Every retiree’s biggest nightmare is running out of money in retirement.

Roughly two-thirds (64%) of respondents to a survey by the Allianz Center for the Future of Retirement said they were more worried about outliving their savings than dying (1). But what if you could not only mitigate this risk but also boost your savings in retirement simply by making a small adjustment to the way you allocate your money?

Must Read

Thanks to Jeff Bezos, you can now become a landlord for as little as $100 — and no, you don't have to deal with tenants or fix freezers. Here's how
Dave Ramsey warns nearly 50% of Americans are making 1 big Social Security mistake — here’s what it is and 3 simple steps to fix it ASAP
I’m almost 50 years old and have nothing saved for retirement. What do I do? Don’t panic. Here are 6 easy ways to catch up (and fast)

That’s the underlying thesis for research conducted by financial experts Michael Kitces and Wade Pfau in 2013 (2). Their analysis of historical market returns of different asset classes suggests that an unconventional approach to asset allocation could make a big difference in your chances of retirement success.

In fact, under ideal conditions, you could even be 500% richer than someone who takes a conventional approach to retirement portfolio allocation. Here’s a closer look at the math.

Unconventional allocations

Most retirees and financial planners use a simple rule of thumb, the rule of 100, for structuring portfolio allocation in retirement (3). You simply subtract your age from 100 to determine your bond allocation and put the rest in stocks.

So if you’re 60 years old, 60% of your portfolio would be in safe bonds and the remaining 40% in stocks. As you get older you shift more of your money to bonds.

This conventional approach is based on the theory that you have less appetite for risk later in life. If you’re in your 80s, for instance, you don’t have enough time to experience a sharp drawdown in the stock market and recover from it. Gradually increasing your bond allocation as you get older reduces this risk and volatility.

However, this approach increases sequence risk, or the risk that a retiree experiences a big drawdown in stocks early in retirement, according to Kitces (4). If a 60-year-old retires with 40% of her assets in stocks and experiences a bear market early in her retirement, that could permanently reduce the size of her nest egg over the long-term.

This is why Kitces and Pfau propose an unconventional reverse approach to portfolio allocation. Instead of the simple rule of 100, they suggest a retiree should keep more of their assets in secure bonds during the first five to seven years. This means the retiree has less exposure to stock market downturns and more time for the power of compounding to work in their favor.

Story Continues

Their analysis suggests that this approach could reduce the chances of failure, or the chance of running out of money in retirement. The chances of success with this counter-intuitive strategy could be as high as 95.1%, under some scenarios (4). And in some scenarios, it could even lead to a sizable portfolio later in retirement.

Read More: Vanguard reveals what could be coming for U.S. stocks, and it’s raising alarm bells for retirees. Here’s why and how to protect yourself

Best-case scenario

Kitces and Pfau tested their strategy across many different scenarios, the best-case scenario for someone using their approach is that they avoid a stock market crash early in their retirement.

Let’s say two retirees, Geoff and Gisele, both start retirement with $1 million each in the year 2000 and plan to withdraw $40,000 from this portfolio every year. Geoff plans to dedicate 80% of his portfolio to stocks, gradually reducing it to 20% by the end of his retirement, while Gisele plans to reverse this strategy with only 20% in stocks at the start of her retirement rising up to 80% by the end.

They both experienced the 2001 dot-com crash right away. However, Geoff was more exposed to this crash and was also compelled to sell his stocks during a downturn to fund his annual withdrawal. By comparison, Gisele could rely on fixed income from her bond portfolio and experienced only a small hit from this market crash.

This experience has long-lasting consequences for both portfolios. Based on market returns over the next 23 years, Gisele’s portfolio would be worth $1.5 million by the year 2023 while Geoff’s portfolio would shrink to just $316,765.

In other words, Gisele’s portfolio would be nearly 500% larger than Geoff’s, simply because of her choice of allocation strategy and the fact that a market crash occurred early in retirement.

To be clear, this is only one hypothetical scenario with several assumptions. But it illustrates the sizable impact of avoiding sequence risk in retirement. Regardless of the market’s future returns, following Kitces’ approach could be less risky for most retirees, even if it seems counter-intuitive.

You’re really 500% richer than you think if you are this 1 type of retiree. Start maxing out your wealth in 2026