90/10 Retirement Strategy: How To Make Sure You Save Enough for Retirement

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There is a lot to think about before you retire, including how much to save and how you should invest your money. Experts generally recommend investing your money in a portfolio of low-cost index funds, but what does that look like in reality? One possibility is the 90/10 retirement strategy.

Understanding the 90/10 Retirement Strategy

What is meant by the 90/10 rule? The 90/10 retirement strategy is a simple investment approach that involves investing 90% of your money in stocks and the remaining 10% in lower-risk assets that produce yields.

For the yield portion of their portfolio, some investors prefer investment-grade bonds like government bond funds or inflation-protected bond funds such as TIPs. Others prefer to buy short-term Treasury Bills.

The 90/10 retirement strategy is based on the principle that stocks offer higher potential returns over the long term. Meanwhile, bonds offer lower potential returns but also lower risk. This strategy lets you achieve relatively high long-term returns while still maintaining some level of risk management through the allocation to bonds.

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Advantages and Disadvantages

Here is a look at some of the advantages and disadvantages of the 90/10 retirement strategy:


  • Simple and easy to implement
  • Offers potential for higher long-term returns
  • Allows for some level of risk management through allocation to bonds


  • May not work for investors with a low risk tolerance or short time horizons
  • Higher allocation to stocks means higher volatility and risk in the short term
  • May not provide enough diversification if your portfolio only includes a few stocks and bonds

Implementing the 90/10 Retirement Strategy

Since this strategy involves investing 90% of your retirement savings in low-cost equity index funds, you could, as an example, invest in an S&P 500 index fund. These funds invest in approximately 500 of the largest American companies by market cap.

You would then invest 10% of your money in short-term T-Bills or investment-grade bonds. This portion of the portfolio has the dual purpose of providing fixed income while theoretically reducing the portfolio’s risk level. Short-term T-Bills tend to yield between 4% and 5%.

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A critical step of the 90/10 strategy is rebalancing. If one asset outperforms the other, the 90/10 allocation could change, making rebalancing necessary.

For example, imagine you have a $100,000 portfolio with $90,000 invested in an S&P 500 ETF and $10,000 invested in short-term T-Bills. If the S&P 500 ETF has a 10% return for the year and the T-Bills yield 4%, your portfolio would end the year with a $109,400 value.

However, due to the performance disparity, the S&P 500 ETF is now 90.5% of your portfolio, and the T-Bills are now 9.5%. While each has only changed by half a percent, the gap could continue to grow if you don’t take action. Thus, selling some stock and buying T-Bills with the proceeds can bring your portfolio back into balance.

Good To Know

Knowing whether the 90/10 strategy is right for you depends on your retirement goals and needs. One way to decide is to run the numbers through a retirement calculator. However, it’s best to meet with a financial advisor who can help you create a plan that works best for you.

Other Retirement Planning Considerations

The 90/10 rule is far from the only thing to consider when planning for retirement. You may also have to consider factors such as:

  • Social Security: The average monthly Social Security benefit is $1,693.88 as of February 2023. It is important to determine if this would be enough to support your retirement lifestyle.
  • Taxes: Consulting a tax professional can help you save and later withdraw funds in a tax-optimized way.
  • Health care costs: These costs may not be significant while you are working, but they could rise substantially after you retire.
  • Inflation: Rising inflation can erode the purchasing power of your retirement savings over time.
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Bottom Line

By allocating 90% of your portfolio to a low-cost equity index fund and 10% to lower-risk yield-producing assets, you can achieve higher long-term returns while managing risk. However, you must consider your risk tolerance and other factors when deciding if this strategy works for you. Regardless of your retirement strategy, the key is to start saving as early as possible and stick to your plan. Working with a financial advisor can also help you create and implement a retirement plan tailored to your situation.

Information is accurate as of March 23, 2023. 

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