Charting Retirement is a weekly snapshot of retirement-related data.
It is generally advised that retirees should invest no more than 50 per cent in stocks, and the rest in bonds. History, however, suggests that might not be the best approach. The chart shows the average real (after-inflation) return over 14-year periods. The 60-40 mix of stocks/bonds outperformed 50-50 in every period except one. It isn’t a 60-40 mix that should scare retirees, but rather prolonged inflation. Remember that real returns in the 1970s were particularly brutal because of its effects. This is why the Bank of Canada needs to get inflation under control as quickly as possible.
(Source: Canadian Institute of Actuaries Economic Statistics. Investment fees were assumed to be 1% of assets.)
Frederick Vettese is former chief actuary of Morneau Shepell and author of Retirement Income for Life.