Key Takeaways
- • Ric Edelman, former head of Edelman Financial Engines, argues the 60-40 stock-bond portfolio is "dead" because of longevity, not because of the bond market, and says investors should hold 70% to 80% in equities to avoid outliving their savings.
- • Edelman warns that a financial plan assuming a 100-year lifespan "the odds are good you will run out of money" under a traditional 60-40 allocation, per his comments to CNBC's Bob Pisani on "ETF Edge."
- • Edelman promotes bond ladder ETFs, citing the LifeX2035 Term Income ETF (LDDR) as the pioneer, with a 25 basis point fee and a tax advantage in taxable accounts.
- • The Fidelity estimate that an average 65-year-old retired couple in 2024 may need up to $315,000 (after tax) for health care costs frames the funding gap longevity creates.
- • Edelman's diagnostics company plans a blood test for Alzheimer's, detecting the disease ten years before symptoms with 90-95% accuracy, which he says could launch within several months.
Summary
Ric Edelman, former head of Edelman Financial Engines, says the traditional 60-40 stock-bond portfolio has lost its relevance not because of changes in the bond market, but because people are living much longer. Speaking on CNBC's "ETF Edge," he told Bob Pisani that humans have never lived this long as a species, and that financial planning models assuming a lifespan of 100 carry a high probability of depleting savings. He recommends that investors who do not want to risk outliving their assets hold 70% to 80% in equities. "If you die at 80, it's not a problem," he said. "But you live to 90 or 100, or 110, it's an issue."
The article cites several data points for the scale of the challenge. According to the World Health Organization, the number of Americans aged 65 and older is projected to reach 95 million by 2060, nearly 23% of the national population, per the Milken Institute's assessment of the financial implications. Fidelity Investments estimates an average retired couple aged 65 in 2024 may need as much as $315,000 saved after tax to cover health care in retirement. Federal Reserve data, the article notes, show retirement account balances among older Americans are far too low relative to the costs of a longer life. The article also notes that some research suggests recent longevity gains could level off in the coming decades in the U.S. absent major breakthroughs.
Edelman is bullish on health technology, pointing to advances in neuroscience, bioinformatics, 3D printing, robotics and AI, and predicting that "over the next 30 years, humans will routinely live to the age of 100 and beyond." He and his wife acquired a diagnostics company that is developing a blood test to identify Alzheimer's risk up to ten years before symptoms, with 90-95% accuracy. He said the test could come to market "within the next several months" and may also apply to Parkinson's and potentially cancer. He cited average survival of 12 years from diagnosis for Alzheimer's patients, who need 24/7 care, and said the disease "bankrupts millions of American families."
On income solutions, Edelman points to bond ladder ETFs, which buy U.S. Treasuries across maturities from ultra-short to 30 years and return principal as bonds mature. He highlighted the LifeX2035 Term Income ETF (LDDR) as the innovator in this format and said replicating the ladder individually would require buying roughly 120 Treasury bonds ranging from 30 days to 10 years. Using a 10-year ladder ETF as an example, he said an investor receives $900 monthly on a $100,000 investment, of which only about $400 is taxable bond interest, with the remainder representing returned capital. He recommended holding these funds in taxable accounts for their tax efficiency.
Edelman's broader view is that longevity is a mixed development for investors, raising the pressure to fund longer and healthier retirements. He said that "by the time you are 95 you will be healthier than you are today." Pisani announced after a 35-year run that he would step back from his day-to-day role as Senior Markets Correspondent at CNBC.
The article cites several data points for the scale of the challenge. According to the World Health Organization, the number of Americans aged 65 and older is projected to reach 95 million by 2060, nearly 23% of the national population, per the Milken Institute's assessment of the financial implications. Fidelity Investments estimates an average retired couple aged 65 in 2024 may need as much as $315,000 saved after tax to cover health care in retirement. Federal Reserve data, the article notes, show retirement account balances among older Americans are far too low relative to the costs of a longer life. The article also notes that some research suggests recent longevity gains could level off in the coming decades in the U.S. absent major breakthroughs.
Edelman is bullish on health technology, pointing to advances in neuroscience, bioinformatics, 3D printing, robotics and AI, and predicting that "over the next 30 years, humans will routinely live to the age of 100 and beyond." He and his wife acquired a diagnostics company that is developing a blood test to identify Alzheimer's risk up to ten years before symptoms, with 90-95% accuracy. He said the test could come to market "within the next several months" and may also apply to Parkinson's and potentially cancer. He cited average survival of 12 years from diagnosis for Alzheimer's patients, who need 24/7 care, and said the disease "bankrupts millions of American families."
On income solutions, Edelman points to bond ladder ETFs, which buy U.S. Treasuries across maturities from ultra-short to 30 years and return principal as bonds mature. He highlighted the LifeX2035 Term Income ETF (LDDR) as the innovator in this format and said replicating the ladder individually would require buying roughly 120 Treasury bonds ranging from 30 days to 10 years. Using a 10-year ladder ETF as an example, he said an investor receives $900 monthly on a $100,000 investment, of which only about $400 is taxable bond interest, with the remainder representing returned capital. He recommended holding these funds in taxable accounts for their tax efficiency.
Edelman's broader view is that longevity is a mixed development for investors, raising the pressure to fund longer and healthier retirements. He said that "by the time you are 95 you will be healthier than you are today." Pisani announced after a 35-year run that he would step back from his day-to-day role as Senior Markets Correspondent at CNBC.
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