Welcome to Money for the rest of us. This is a personal finance show on money, how it works, how to invest it, and how to live without worrying about it.

I'm your host David Stein. Today is episode 460. It's titled,

Should you be 100% invested in stocks before and during retirement?

A recent study says yes. The listener recently sent me this paper. He said he was fascinated by it and its implications.

The paper is titled Beyond the Status Quo, A Critical Assessment Advice.

It's by three co-authors, Enarcholova, Cedarburg, and Odorti. They say they challenge two central tenets of life cycle investing.

One, investors should diversify across stocks and bonds. They argue it should be 100% stocks. The second is the young

should hold more stocks than old. They argue that retirees should still be

100% invested in stocks.

They write an even mix of 50% domestic stocks

and 50% international stocks held throughout one's lifetime vastly outperforms age-based

stock-based strategies in building wealth, supporting retirement consumption,

preserving capital, and generating bequest.

That's some pretty startling conclusions.

We'll take a look at this paper as well as a second paper by the same authors that looks

at the spending rate to see if this is something that we should actually do.

Can we do it? We have the stomach to be a

100% in stock despite the big drawdowns that can be seen. The authors in the

paper point out that Americans contribute about 5% of their total employee compensation

to define contribution plans. That's a 586 billion dollars in just 2020.

Big question they have is how should they invest those

savings and the authors share the the consensus wisdom from investing

...