A Time Capsule from 1988

What Retirement Planning Used to Look Like

I don’t know about you, but when my favorite football teams are done for the season, I find myself wrestling with a sense of emptiness and suddenly have time on my hands come Saturday and Sunday. With temperatures outside in the single digits, snow whipping sideways and the wind howling, I decided it was finally time to tackle some of those boxes that had been silently judging me from the back of the closet – the ones demanding to be organized, or more honestly purged. One of those boxes were items that belonged to my late father-in-law, Jack. The box was full of treasures – World War II medals, his Ray Ban aviator sunglasses from the 1940s, a pipe that belonged to his father and a newspaper clipping, carefully saved from The New York Times dated June 12, 1988. The headline read “Mapping a Strategy for Retirement.” Other than those related to my husband and his sister’s high school achievements, it was the only article he’d clipped and kept. What made it particularly poignant was the timing – Jack was born on June 27, 1924, which meant he saved this article just two weeks before his 64th birthday.

Reading this 38-year-old retirement planning advice was like cracking open a financial time capsule. Some guidance has aged remarkably well, while other recommendations made me cringe. The clipping even included a summary of consumer rates from that summer where money market funds were paying 6.62%, and home mortgages stood at a staggering 10.63%. And we thought we had it bad right now, try to imagine that conversation with your mortgage broker today!

When Time Isn’t On Your Side

One thing that immediately jumped out at me was the article’s target audience – people in their 40s and 50s who were just beginning to plan for retirement. Yikes! While it’s never too late to start, waiting until your 40s or 50s means you’ve already missed out on decades of compound growth. The timeless lesson? Start planning as early as possible. Your future self will thank you profusely.

To the article’s credit, it got the fundamentals right – it recommended determining how much cash you’d need to cover retirement living expenses. That’s still the perfect place to begin any retirement plan today.

The Inflation Monster of the 80s

Here’s where things get interesting. The article quotes a financial planner who warned that “money generally loses half its buying power over 10 years, so what sounds like a lot of money today may not be.” While we’ve recently experienced an inflation spike coming out of COVID, it was nothing compared to the prolonged inflation nightmare of the 1970s and 80s. That planner’s warning reflected the harsh reality of the times.

To put this in perspective, over the past 30 years, average inflation has run about 2.5% annually, with money losing roughly 22% of its buying power over 10 years – not 50%. The Federal Reserve targets a 2% inflation rate, which would take about 35 years to halve purchasing power, not 10. Don’t get me wrong – inflation’s erosion is absolutely real and must be factored into your planning. It’s just typically much slower than what people were experiencing back when Jack saved the article.

The Vanishing Pension

The article also talked extensively about company pensions, which have sadly become as rare as a rotary phone. Unless you work for the government, public sector or a unionized industry, traditional pension plans have mostly gone the way of the dinosaur. Most private sector companies shifted to 401(k) plans decades ago, and even where pensions still exist, many have been frozen in place.

There was also discussion of the Tax Reform Act of 1986, a major overhaul that simplified the tax code and aimed for greater fairness. It slashed the number of tax brackets from 15 down to just two (later adjusted to three) and dropped the top individual income tax rate from 50% to 28% – a massive cut. The bottom rate rose from 11% to 15%. To offset the revenue loss from lower rates, the law eliminated or reduced many deductions and tax loopholes, broadening the tax base so more income was taxed. It even eliminated the preferential treatment of long-term capital gains, taxing them as ordinary income, though this was later reversed.

Most policy analysts view the 1986 reform as a genuine achievement – imperfect but significant – especially compared to today’s political gridlock on tax policy. It’s often cited nostalgically as an example of when both parties could actually work together on complex legislation. Whether its specific policy choices were optimal remains contentious, particularly regarding its effects on inequality and certain industries, but the fact that it happened at all seems almost miraculous from our current vantage point.

The Advice That Aged Like Milk

But here’s what really made my jaw drop – the asset allocation recommendations. According to the article, you should divide your investments equally between growth and income in your 40s, shift to 75% income at age 50, and move entirely into fixed income at age 55 because “you can’t afford to lose money at that age.”

Say what?

Can you imagine being 80 years old today and having moved to all fixed income at age 55? Let me paint you a picture of what you would have missed. If someone had followed that advice and gone 100% bonds at age 55 in 1999, they would have earned solid returns of around 4-5% annualized through 2024. Not bad, right? But here’s the kicker – a 60/40 stock-bond portfolio over that same period would have returned approximately 7-8% annualized.

Let’s talk real dollars. Starting with $3 million at age 55 in 1999, a 100% bond portfolio would have grown to approximately $8-10 million by 2024. Sounds pretty good! But that 60/40 portfolio? It would have grown to approximately $15-18 million. By staying with the 60/40 approach rather than going all fixed income, you would have gained an extra $6-8 million. That’s not a typo.

And remember, the 1999-2024 period wasn’t exactly smooth sailing. This timeframe included the dot-com crash from 2000-2002, the financial crisis of 2008-2009, the COVID crash in 2020 and the rare simultaneous decline in both stocks and bonds in 2022. Despite all that volatility and all those gut-wrenching moments, the equity exposure in the 60/40 portfolio significantly outperformed over the full period.

The Takeaway

That old “your age equals your bond percentage” rule has been largely discredited, especially given our increased life expectancies. If you’re 80 years old today, you could easily live another 10 to 15 years or more. You still need growth in your portfolio to combat inflation and support that longevity.

Finding Jack’s clipping reminded me that financial wisdom evolves as our world changes. Some principles endure – start early, plan carefully, consider inflation. But others, like the idea that you should abandon stocks entirely in your 50s, turned out to be overly cautious advice that would have cost people dearly.

I wonder what financial advice from today will make our children and grandchildren smile and shake their heads 38 years from now. What are we getting wrong? What will seem as outdated as the advice to go 100% bonds at 55? Only time will tell but I hope they find our old articles as fascinating as I found Jack’s.