When it comes to planning for retirement, most people assume they should gradually shift their investments from stocks to bonds. That’s the conventional wisdom—reduce volatility, protect capital, live off income. But I’ve taken a different route. I’ve allocated 100% of my retirement portfolio to stocks, and I’ll explain why, how I manage the risks, and what you should consider before doing the same.
This strategy isn’t for everyone. But if you’re willing to look beyond tradition, the numbers—and history—might surprise you. In this article, I’ll break down the logic behind a 100% stock portfolio for retirement, backed by data, examples, calculations, and different angles of analysis.
Understanding Asset Allocation Basics
Asset allocation is the process of dividing your investment portfolio across different asset classes—primarily stocks, bonds, and cash equivalents—to balance risk and return. The traditional model is the “age in bonds” rule: subtract your age from 100 and invest that percentage in stocks. So if you’re 65, you’d hold 35% in stocks and 65% in bonds.
This rule assumes that as you age, you become more risk-averse and need more stability. But this advice originated when bond yields were higher and lifespans were shorter.
Today, with longer retirements and low bond yields, the equation has changed.
The Case for 100% Stock Allocation
The main argument for a 100% stock portfolio is simple: stocks provide higher long-term returns than bonds or cash. Historically, U.S. stocks have returned about 10% annually before inflation.
Expected Return Difference
Let’s compare expected returns based on historical averages:
| Asset Class | Historical Average Return (Nominal) | Historical Average Return (Real) |
|---|---|---|
| U.S. Stocks (S&P 500) | 10.2% | ~7.0% |
| U.S. Bonds (10-Year Treasuries) | 5.1% | ~2.5% |
| Cash (T-Bills) | 3.3% | ~0.8% |
Over a 30-year retirement, this difference becomes dramatic.
Historical Performance of All-Stock Portfolios
Let’s look at some real-world performance using rolling 30-year periods from 1926 to 2020.
| 30-Year Period | 100% Stock Portfolio (CAGR) | 60/40 Stock/Bond Portfolio (CAGR) |
|---|---|---|
| 1926–1955 | 10.0% | 8.6% |
| 1950–1979 | 11.0% | 9.2% |
| 1980–2009 | 10.6% | 9.1% |
| 1990–2019 | 9.8% | 8.4% |
Source: Ibbotson SBBI Yearbook, Morningstar
The extra 1.5% to 2.0% annually compounds into a huge gap. Using the future value formula:
FV = PV \times (1 + r)^tIf I invest $500,000:
- With 100% stocks at 9.8% over 30 years:
With 60/40 at 8.4% over 30 years:
FV = 500,000 \times (1 + 0.084)^{30} = 500,000 \times 10.94 = 5,470,000That’s a $2.5 million difference.
Volatility, Drawdowns, and Recovery Time
The trade-off? Volatility.
Here are max drawdowns (losses from peak to trough) from past crises:
| Crisis | S&P 500 Drawdown | Years to Recover |
|---|---|---|
| Great Depression | -86% | 25 years |
| Dot-Com Crash | -49% | 6 years |
| Global Financial Crisis | -57% | 4 years |
| COVID-19 Crash | -34% | 5 months |
Stocks always come back, but sometimes the recovery takes time. If you’re selling during these downturns, the losses become permanent.
Sequence of Returns Risk and Mitigation Tactics
The sequence of returns risk is the danger of experiencing poor returns early in retirement. Here’s a simplified example:
Example
Two retirees have $1,000,000 and withdraw $40,000 annually. One gets bad returns early, the other late. Both average 7%.
- Retiree A: -15%, -10%, +20%, +15%, +10%
- Retiree B: +10%, +15%, +20%, -10%, -15%
Retiree A may run out of money faster, even though average returns are identical.
To mitigate this, I use these tactics:
- Hold 1–2 years’ worth of expenses in cash
- Use a bucket strategy to draw income from dividends during down markets
- Consider part-time income or delay retirement
Dividend Income vs. Bond Income
Bonds pay fixed interest. Stocks can pay growing dividends. Here’s a quick comparison:
| Metric | Bonds (10-Year Treasury) | Dividend Stocks (S&P 500) |
|---|---|---|
| Yield | ~4.3% (as of 2024) | ~1.6% |
| Growth | 0% | ~6% annually |
| Inflation Protection | None | Partial (via dividend growth) |
If I hold quality dividend-paying stocks like Johnson & Johnson, PepsiCo, or Procter & Gamble, my income rises over time. Bonds don’t offer that.
Tax Considerations for Stock-Only Portfolios
Stocks are more tax-efficient. Here’s how:
- Qualified dividends are taxed at 0%, 15%, or 20%, depending on income
- Long-term capital gains are taxed at similar rates
- I can defer taxes indefinitely by not selling
- Step-up in basis benefits heirs
Bonds, on the other hand, generate ordinary income, taxed up to 37% federally.
Psychological Readiness and Behavior Gaps
Behavioral finance tells us that most people can’t handle watching their portfolio drop 30–50%. They panic-sell at the worst time.
To stay 100% in stocks, I had to train myself to:
- Ignore daily headlines
- Focus on long-term returns
- View downturns as opportunities, not threats
If I can’t sleep during a crash, then I probably shouldn’t be in this strategy.
Practical Examples and Simulations
Let’s look at two retirement scenarios using the Trinity Study’s safe withdrawal rate model.
| Scenario | Portfolio | Withdrawal Rate | Success Rate (30 years) |
|---|---|---|---|
| A | 100% stocks | 4% | 98% |
| B | 60/40 mix | 4% | 96% |
| C | 40/60 mix | 4% | 85% |
In Monte Carlo simulations using historical data and 10,000 random market scenarios, 100% stocks outperformed both 60/40 and 40/60 allocations.
When a 100% Stock Allocation Might Make Sense
I believe this strategy fits well if you:
- Have a long retirement horizon (30+ years)
- Don’t rely on the portfolio for immediate income
- Have other sources of income (Social Security, rental income)
- Are comfortable with market swings
- Are investing in diversified, high-quality U.S. and global equities
When It Might Not Work for You
This strategy is not suitable if:
- You need guaranteed income
- You panic during market drops
- You’re within 5 years of retirement without a cash buffer
- You expect to tap your investments during a downturn
Even if the math supports it, behavior trumps logic.
Conclusion
Choosing a 100% stock allocation for retirement is an unconventional path, but for some of us, it makes perfect sense. The data, historical returns, and tax advantages are compelling. Still, it’s not just about numbers—it’s about how you react under pressure.
I chose this route knowing the risks, building cushions, and preparing mentally for volatility. If you’re considering it too, run the numbers, test your assumptions, and ask yourself if you have the temperament to stay the course.
Ultimately, retirement isn’t just about playing defense. Sometimes, staying on offense—smartly and calmly—is the best move.
