Can you retire using a 60/40 portfolio?

By Mark Seed, myownadvisor

Special to Financial Independence Hub

I enjoy posting retirement income case studies on this site, so let’s jump right in: can my readers retire using a 60/40 portfolio?

I believe they can. 

Can you retire using a 60/40 portfolio?

As mentioned on this site many times over the years, retirement income planning is a puzzle for some. Not all retirees will have more income generated from their portfolio than what their annual expenses are … although that is probably ideal for some.

That said, it is possible (although rare) to save too much for retirement – if you rely on general assumptions to calculate how much you’ll need.

A good example is your retirement income replacement rate.

The replacement rate is the percentage of the pre-retirement income you need to maintain your standard of living in retirement. I believe overestimating this rate can cause you to save more than what you need for retirement spending.

A general rule shared by some experts is you’ll need between 70-80% of your current income to maintain a comfortable lifestyle in retirement. This is because once saving for retirement is done, and paying off any debt prior to retirement, those pre-retirement expenses drop off.

Other experts cite 50-70% for the necessary income replacement rate. I shared that in this post.

Which one is correct?

Spending 50% of your pre-retirement income is likely a MUCH different number for you and I, vs. 80%.

Retirement rules of thumb are interesting for back-of-the-napkin fun but they have no value in any detailed income planning work. Which makes the following simple but essential IMO in your retirement income planning steps:

Step 1: What are your spending goals?

Step 2: What are your investment savings and income sources to meet those needs?

Step 3: What is the bare minimum lifestyle that you’re ready to live off?

Here is a free retirement income planning playbook. No fee required.

Can you retire using a 60/40 portfolio?

My reader, Olin (name changed) is single and wants to semi-retire this summer at age 55. He has no children or dependants. He’s had a good paying job over the years as a graphic designer but wants to take more of his artistry on the road in the coming years…  He performs at various music gigs during the year for hobby/travel income.

After reading my site, including some MoneySense Best ETFs in Canada editions over the years, he’s landed on a comfortable 60/40 stock/fixed income portfolio across his accounts: that matches his tolerance for investing risk but also seeks to simplify how he invests for his retirement: in a single low-cost all-in-one ETF.

Olin appreciates and respects the dividend income journey by many bloggers but Olin doesn’t have enough money saved up to generate tens of thousands in dividend or distribution income from his portfolio without taking on higher risk bets: so he wants to rely on more of a total-return approach. This should work out well for him based on some historical research and trending.

As a student of market history, Olin is well aware instead of living off dividends or distributions, he could simply sell-off assets as he ages to meet his lifestyle needs. While that approach has some risks as well, depleting your capital over time, Olin is also very confident he could scale-up or scale-down discretionary spending in semi-retirement at will: he will spend more in “good years” and curtail some spending in “bad years.” Being variable with his spending should allow for even greater financial flexibility since he remains out of debt and mortgage-free.

Leveraging some Vanguard research I presented at an Ottawa Share Club meeting in May, 60/40 stock/fixed income portfolios have been very reliable, pension-like constructs for years.

Reference: https://www.vanguard.ca/en/insights/global-6040-portfolio-steady-as-it-goes

While the financial future is always uncertain, there is nothing to suggest a global mix of stocks + a decent weight of fixed income shouldn’t deliver similar results: balancing risk and reward in the decades ahead.

Can my reader Olin retire using a 60/40 portfolio?

Here are Olin’s inputs and assumptions as part of this case study:

• Olin, single, age 55 later this year – wants to semi-retire summer 2025. He makes $80,000 (gross).
• He wants to spend > $50,000 after-tax starting this summer.
• He loves travel, and will take his guitar with him! He has determined he wants some “go-go” spending years between ages 55-79 and will have “slower-go” spending years after age 80.
• Olin has no workplace pension.
• He has no debt. He owns his townhome in Ottawa worth about ~ $750,000.

Olin knows that if he retires/semi-retires sooner than most, he will not get MAX Canada Pension Plan (CPP) income given that government benefit is a contribution plan unlike OAS (Old Age Security) that is funded through general tax revenues. He will need to rely on other income sources to fund his retirement.

• Olin has assumed he will get close to 75% MAX CPP income benefits at age 65: he has contributed the yearly maximum pensionable earnings every year for the last 30 years since his mid-20s.
• He has also assumed he will get 100% MAX OAS benefits at age 65: taking pressure off his portfolio withdrawals in his mid-60s. OAS payments are adjusted quarterly for inflation each January, April, July and October for CPI and the good news is: monthly payment rates will increase if the cost of living goes up but monthly payment rates will not decrease if the cost of living goes down.

Like I mentioned above, Olin remains youngish; he will still work a bit in semi-retirement. He plans to earn $1,000 per month (100% taxable income) between ages of 55-65 for his travel money via playing music gigs.

Although he is likely to receive much more, he mentioned to include a small inheritance from his parents ~ $50k at age 70 in the income planning.

Beyond his music gigs, which he believes he can scale-up or scale-back at will, he will focus on living off RRSP/RRIF withdrawals while part-time earning $12,000 or so per year.

Olin assets at age 54 invested in 60/40 low-cost all-in-one ETF: XBAL

• RRSP/RRIF = $600,000 invested in XBAL.
• $0 LIRA/LIF = no workplace pension.
• TFSA = $175,000 invested in XBAL.
• Non-Registered, you guessed it, invested in XBAL worth $200,000.

_________

$975,000.

Olin told me to include no more than 3.5% real return from his stock/bond portfolio (i.e., after inflation is accounted for; which I would support); so anything close to 6% annualized returns with 2.5% sustained inflation would achieve that.

Can my reader Olin retire using a 60/40 portfolio?

Let’s look at the results!

Olin wants to spend $50,000 per year, he can easily spend $55,000 if he works part-time given almost $1 million portfolio at this time:

Images courtesy of Cashflows & Portfolios work. 

Olin drawdown approach and fast facts:

• $600,000 RRSP/RRIF assets withdrawn first; gone by mid-60s.
• Then non-registered assets are withdrawn next, leaving a $700k TFSA balance at age 78 to start withdrawals from.
• TFSA withdrawals (“cash investments” above) + CPP + OAS income streams sustain Olin’s spending until age 95. His tax rate will also be super low in his 70s and 80s and 90s given TFSA withdrawals are not income-tested.
• Spending $55,000 at age 55 will be the same as spending over $70,000 at age 65 ten years later due to inflation/cost of living.
• His primary home is worth about $2 million at age 95 assuming 2.5% inflation/price appreciation.

(Note: even if Olin doesn’t work at all, he can still retire, but spending needs to be closer to $49,000 per year in year 1 in retirement.)

Can you retire using a 60/40 portfolio Summary

As always, retirement income planning comes down to a few key concepts that apply to most:

1. What do you want to spend and when,
2. What are your income sources for spending, and
3. Can you be variable with spending needs and wants when things change.

In this case study, Olin can meet his semi-retirement dreams by working part-time to fund his discretionary travel fun knowing that CPP and OAS income streams will come online in his mid-60s to sustain a good portion of his inflation-protected spending. While his registered and non-registered assets are liquidated by age 78, TFSAs compounding away for many decades earning about 6% return should provide no concerns that Olin will run out of money and even if things get close to that, well, his house could be worth $2-million in his 90s with 2.5% sustained inflation based on the value it is today.

When it comes to 60/40 portfolios, history tells us it’s more than OK to draw down your assets as you age. That’s the entire point with a total return approach.

Pretty good closing arguments from Vanguard too ….

“It’s easy to get caught up in the noise and year-to-year absolute returns. That is why we encourage our clients to focus on what they can control: their goals, asset allocation, costs, and discipline in implementing their investment strategy. The strategic asset allocation and “steady as it goes” results of a globally diversified balanced portfolio are a great starting place for long-term investors, and that is as true today as any time in history. The 60/40 portfolio has been a remarkably consistent performer over the long-term, and with the tailwind of higher bond yields and a more balanced outlook, we see it as poised for another strong decade of results.”

Source: https://www.vanguard.ca/en/insights/global-6040-portfolio-steady-as-it-goes

Want your own low-cost retirement income projection?

Just reach out! I offer discounts when you do as a My Own Advisor reader for services that cost literally thousands of dollars less than the alternatives.

I am happy to offer discounts to my fellow DIY investors and followers – anytime. 🙂

Check out my work along with my partner Joe at Cashflows & Portfolios.

We have been using various retirement projection tools over the years for our personal retirement income journeys and now we’re using these tools to help readers, DIY investors like you, with your personal retirement projections. We will answer your key retirement income planning questions like:

• Do you have enough to retire with your current lifestyle/spending?
• What will be your estate value based on your spending plans?
• Amongst your pension(s) or RRSPs or TFSAs or your taxable accounts, what accounts should you tap first to smooth out taxation impacts over time?
• Should you take CPP or OAS at age 65 or 70?
• And more! 

Again, contact us anytime to learn more and get started.

Thanks for reading and following along. I hope this latest free retirement income case study helped you out with your planning.

Mark Seed is a passionate DIY investor who lives in Ottawa.  He invests in Canadian and U.S. dividend paying stocks and low-cost Exchange Traded Funds on his quest to own a $1 million portfolio for an early retirement. You can follow Mark’s insights and perspectives on investing, and much more, by visiting My Own Advisor. This blog originally appeared on his site on June 2, 2025 and is republished on Findependence Hub with his permission