Financial Advisors

Advisor’s Guide to Protecting Retirement Income

A thought-provoking white paper, “An Advisor’s Guide to Protecting Retirement Income,” was recently published to motivate financial advisors to rethink and reposition their retirement services with the goal of better helping their clients financially prepare for and live through retirement. By going beyond the traditional accumulation of retirement assets and income-generating investments, the white paper questions whether advisors will need to play a bigger role for their clients by providing a more ongoing, proactive management of retirement income sources. In particular, they should consider investigating for themselves a more dynamic glidepath approach to their retirement planning offering.

The stakes are great as every day in the U.S. 10,000 people turn 65 leading to 88.5 million Americans over the age of 65 by 2050. With increasing longevity expectations by retirees – life expectancy at 65 went from 79 years in 1940 to 85 years today – one in three workers today are not confident they will have enough money to be comfortable in retirement. Advisors will have to show strong leadership and personalized support to better address those concerns and needs.

To better understand the thinking and results behind the white paper, we reached out and talked with one of the authors, Jon Robinson, who is CEO and Co-Founder of Blueprint Investment Partners and an Institute member. In addition to asset management services, the firm provides its advisor clients with practice management solutions, including tools and coaching to help advisors implement an optimal business model and strategies to compete in our industry’s new operating environment of accelerating change.

Hortz: What was your motivation in writing this white paper about how advisors can protect retirement income?

Robinson: In my opinion, too many decisions that impact an investor’s portfolio are made based on criteria that essentially boil down to tradition, gut feelings or bravado. At Blueprint, we think that kind of methodology gambles with an investor’s financial future. Instead, we make decisions based on hard data because it is the one thing that has the best chance to cut through emotional biases.

Brandon Langley, our President and Co-Founder, and I wanted to take the same data-backed approach to this topic of protecting retirement income.

While the 60/40 portfolio has been the bread-and-butter strategy that helped millions of investors retire comfortably in the past, we have been sounding an alarm about the structural risks of this approach for years. The warning signs surrounding what we call “the 60/40 problem” are more dire in 2022, given the potential end of the post-Global Financial Crisis secular bull market in equities, the prospect of the first sustained rising U.S. interest rate environment in more than 40 years, and highest inflation level in four decades.

Therefore, we sought to test an alternative to the traditional approach of using a 60/40 portfolio and then stepping down equity exposure as a retiree ages. We wanted to know if an alternative approach that used a more dynamic glidepath warrants further attention from financial advisors.

Hortz: What are some of your concerns on the historically preferred methods of addressing retirement income?

Robinson: Advisors usually are quick to point to tools like fixed income investments, annuities, target-date funds and the bucket approach as instruments for providing and protecting retirement income. A drawback associated with each of these is that they are not very dynamic. This puts them at odds with the market, which is characterized by constant change.

Target-date funds, balanced portfolios, and even the bucket system are somewhat adaptive in that they adjust as an investor gets closer to and progresses through retirement, but their modifications are driven by a human factor (age), not the market environment.

The traditional glidepath can work well if a retiree is lucky enough to experience a strong equity market early in retirement, see rising fixed income yields in later years, and have steady rates of inflation throughout. Absent those conditions, the outcomes can range from lackluster to catastrophic.

A good example of bad timing is someone who retired around 2000. They quickly faced a bear market in 2001 to 2002, when a traditional dynamic glidepath likely had them at around 60% equity exposure. Then, their equity exposure would have been reduced at the very beginning of the bull market that began in 2010, with another equity reduction likely coming around 2015 as the bull was still running. If the retiree is not taking withdrawals, it is possible for their accounts to have recovered by now. But if they are taking withdrawals – and isn’t that the whole point of a retirement account for a retiree? – they may very well be underwater.

For this same year 2000 retiree, a dynamic glidepath would have changed the asset allocation based only on the market conditions, irrespective of the individual’s age.

Hortz: Can you describe what you mean by “dynamic glidepath” in more detail?

Robinson: This is explained fully in the Guide, but at a high level, a dynamic portfolio seeks to continually take advantage of strong-performing asset classes while also attempting to minimize exposure to those showing weakness. This means the portfolio can look dramatically different depending on the market conditions at the time of and throughout retirement.

Here is an example: Let us say equities are rising and volatility is low when someone enters retirement. In these conditions, a dynamic glidepath and traditional glidepath portfolio are likely to look about the same.

Now, let us reverse the situation. Imagine that equities are falling and volatility is high at the time someone enters retirement. The traditional glidepath likely would be at a 60/40 allocation, but a dynamic glidepath might be designed to position the investor at something closer to 25/75, for instance. However, once volatility decreased and equities regained strength, a dynamic glidepath could seek to readjust the allocation to again favor equities.

The whole point is to try to protect capital when conditions are poor but stay aggressive when conditions are favorable.

Hortz: You mentioned that you wanted to test if the dynamic glidepath presents a viable alternative to the traditional glidepath. However, with rates rising and given the recent performance of the 60/40, isn’t now actually a good time to use the traditional balanced approach?

Robinson: You are not the first person to bring this up.

I think the best way to answer this question is to throw out another one: Is it worth making that bet? If an advisor is going “all in” on the 60/40 model now that it has been beaten up, they are essentially market timing.

A dynamic glidepath is different because if developed objectively, it takes timing the market out of the equation. A systematic investing process that makes the allocation decisions can be rooted in price data, not a gut feeling about the market’s upcoming direction. There is no prediction involved.

Advisors are not locked into one environment. So, if the 60/40 has another good run, in theory so too should a dynamic glidepath. And if the 60/40 continues to struggle, a more dynamic glidepath can be built to have a plan for managing risk in those environments too.

Hortz: What are some of the primary considerations you think advisors should integrate into their retirement planning process with their clients?

Robinson: There are the obvious considerations like withdrawal rate, sequence of returns risk, inflation, life expectancy and suitability. Most of these are already well-embedded in how advisors discuss retirement planning and retirement income with their clients.

I think suitability is worth talking more about because it often does not get the attention I think it deserves.

We all know that advisors may only provide guidance that is appropriate for a client based on their unique circumstances. However, there is plenty of grey area when it comes to defining suitability, and some advisors take a more robust approach than others.

Most traditional asset management and financial planning involves what we call “one-dimensional suitability” because it only uses quantitative factors to access an investor’s tolerance for risk. This approach does not consider how likely an investor is to stick with a plan or investment over time, even if on paper the risk profiles are a match.

We think a dynamic glidepath approach can offer “two-dimensional suitability” because it can account for both qualitative factors that often keep clients on a straighter path toward their long-term goals. Qualitatively, clients are more likely to stay anchored to the plan when their portfolio behaves in a way they can “stomach” in good times and bad. For example, a dynamic glidepath’s plan for limiting equity exposure during bear markets may be likelier to “sit well” with new retirees than watching account value dwindle due to the 60% equity allocation of the traditional approach.

Hortz: What other areas did your whitepaper explore, and how would you summarize your findings?

Robinson: Our research compared the traditional and dynamic glidepath in several ways. We looked at performance since 2000 to consider a practical application for someone who would have retired 22 years ago. This provided sufficient data for us to draw conclusions, in our opinion, but we also wanted to further test the potential value of a dynamic glidepath approach by analyzing a longer-range view.

Therefore, we looked at the best and worst historical times to retire since 1928. We thought it was worthwhile to present the longer-range data because it further stress tested the two glidepath approaches and accounted for flexibility in assumptions about retirement age, life expectancy, and legacy planning.

We believe the data showed that the dynamic glidepath approach improved the odds of success since 2000, which has included two prolonged bear markets along with multiple favorable periods. Even during the more extended timeline since 1928, the strategy held up well during extreme conditions.

But advisors do not have to take my word for it. We invite them to download “An Advisor’s Guide to Downside Protection” and review the data for themselves. We also welcome discussions, and even challenges, about our findings. Retirement income is an important topic that I cannot imagine going away anytime soon. Having conversations and testing new ideas with data is time well spent, in my view.

The Institute for Innovation Development is an educational and business development catalyst for growth-oriented financial advisors and financial services firms determined to lead their businesses in an operating environment of accelerating business and cultural change. We operate as a business innovation platform and educational resource with FinTech and financial services firm members to openly share their unique perspectives and activities. The goal is to build awareness and stimulate open thought leadership discussions on new or evolving industry approaches and thinking to facilitate next-generation growth, differentiation, and unique community engagement strategies. The institute was launched with the support and foresight of our founding sponsors – Ultimus Fund Solutions, NASDAQ, FLX Networks, Advisorpedia, Pershing, Fidelity, Voya Financial, and Charter Financial Publishing (publisher of Financial Advisor and Private Wealth magazines).

Blueprint Investment Partners is an investment adviser registered under the Investment Advisers Act of 1940. Registration as an investment adviser does not imply any level of skill or training. The oral and written communications of an adviser provide you with information about which you determine to hire or retain an adviser. For more information, please visit and search for our firm name.

Past performance is not indicative of future results. The material above has been provided for informational purposes only and is not intended as legal or investment advice or a recommendation of any particular security or strategy. The investment strategy and themes discussed herein may be unsuitable for investors depending on their specific investment objectives and financial situation. Opinions expressed in this commentary reflect subjective judgments of the author based on conditions at the time of writing and are subject to change without notice.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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Bill Hortz

Bill Hortz is an independent business consultant and Founder/Dean of the Institute for Innovation Development- a financial services business innovation platform and network. With over 30 years of experience in the financial services industry including expertise in sales/marketing/branding of asset management firms, as well as, creatively restructuring and developing internal/external sales and strategic account departments for 5 major financial firms, including OppenheimerFunds, Neuberger&Berman and Templeton Funds Distributors. His wide ranging experiences have led Bill to a strong belief, passion and advocation for strategic thinking, innovation creation and strategic account management as the nexus of business skills needed to address a business environment challenged by an accelerating rate of change.

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