Income Planning Needs A Broader Diversification Conversation

Inflation, rising healthcare costs and Social Security uncertainty are stretching traditional portfolios further than they were built to go

by Shaun Bina

Retirement income planning used to rest on two moving parts: how much a client saved, and how the market performed after they stopped adding to it. Advisors are now building around a third and fourth variable that carried far less weight a generation ago: how fast healthcare costs are climbing, and how much of a client’s Social Security benefit will still be there when they need it. Neither shows up on a standard risk tolerance questionnaire, but both are starting to shape how income plans actually get built.

There is also a longer time horizon to plan around. Retirements that once lasted fifteen or twenty years are now regularly stretching past twenty-five, which gives inflation more years to erode purchasing power and a benefit cut more years to compound. A portfolio built around just two asset classes has less room to make up for a rough stretch along the way.

Learning The New Math Of Retirement

Fidelity’s newest Retiree Health Care Cost Estimate puts the number at $185,500 for a single 65-year-old retiring this year, a 7.5% jump from last year and the steepest single-year increase in the study’s 25-year history. For a couple, that figure roughly doubles, and none of it accounts for long-term care.

That kind of increase compounds against fixed retirement income the same way ordinary inflation does: quietly, then all at once, whenever Medicare premiums rise faster than a client’s cost-of-living adjustment can keep pace. This year the gap was wide enough that a large share of the average retiree’s annual raise went straight to covering the premium increase alone, before a single other medical expense was considered. Walking a client through that split, rather than just the headline number, tends to make the risk feel real instead of abstract.

When “Guaranteed” Income Isn’t As Guaranteed As It Sounds

Social Security has long been the fixed leg of most retirement income plans, the piece advisors could count on regardless of how markets behaved. That assumption is getting harder to make with a straight face. A new HealthView Services analysis found that a 54-year-old couple retiring in eight years could lose more than $160,000 in lifetime benefits if Congress doesn’t shore up the program, and a high-income couple could lose as much as $500,000.

The range matters more than any single figure here, since the eventual size of any benefit cut depends heavily on which fix Congress ends up choosing. Whatever lawmakers decide, and they may decide nothing until they have no choice, a plan that assumes Social Security will hold steady is really a plan built on an assumption rather than a fact. Clients closer to retirement have less time to adjust if that assumption turns out wrong, which is exactly why the conversation is worth having now rather than after a legislative outcome.

Where Traditional Diversification Runs Out Of Room

A 60/40 portfolio was built to smooth out stock market swings, not to offset inflation or a benefit cut, and it doesn’t always do its job during a downturn. Stocks and bonds have moved together more often than diversification theory would predict, especially in years when inflation drives the story instead of growth or recession. When interest rates rise to fight inflation, bond prices tend to fall at the same time stocks wobble, which removes the cushion a 60/40 split is supposed to provide. A client drawing income from that kind of portfolio during a correlated downturn takes on sequence-of-returns risk on top of everything else: the wrong five years at the start of retirement can shorten how long a portfolio lasts, even after the market fully recovers.

None of this means stocks and bonds stop mattering. It means the traditional two-asset framework was built for a different set of risks than the ones retirees are managing today.

Precious Metals As A Third Leg

More advisors are adding a third category to that conversation: physical gold and silver, held directly rather than through a fund. Gold has historically moved independently of stocks and bonds, which is part of why it tends to hold up during the kind of downturn that damages a 60/40 portfolio’s income-producing power. It is also one of the most liquid asset classes available, so a client holding physical metal isn’t locked into a position the way they might be with real estate or a less liquid alternative.

The last decade backs that up with real numbers. Gold rose roughly 300% between January 2016 and January 2026, compared with a 238% gain in the S&P 500 over the same stretch. It would be fair to say gold outperformed the stock market over the past ten years. Over that same period the dollar lost about a third of its purchasing power to inflation: a $100 basket of goods in 2016 cost roughly $133 by 2026. That same $100, invested in gold instead, would have gained closer to $300.

That track record won’t repeat itself on a fixed schedule, and no advisor should promise a client that it will. What it does show is that gold has functioned as a real hedge against the two risks doing the most damage to fixed retirement income right now: inflation and market correlation. For clients who plan to pass assets down rather than spend them, that same stability over multi-decade stretches is part of the appeal.

What This Looks Like In An Actual Client Conversation

For most clients, adding precious metals to a retirement plan means opening a self-directed IRA that holds physical gold or silver, typically in the form of government-minted coins, which keeps purity and weight independently verifiable rather than resting on a dealer’s word. The rollover usually pulls from an existing IRA or 401(k) and doesn’t require the client to touch the funds directly, so it doesn’t trigger a taxable distribution when it’s handled correctly.

The advisor’s role in that conversation doesn’t change. A precious metals specialist can work alongside a client’s existing advisor to source the metal and arrange insured depository storage, with a buyback option available whenever the client is ready to sell. But the advisor still decides how much of a portfolio, if any, belongs in physical metal and how that allocation fits the broader income plan. Clients weighing this option should ask how long delivery actually takes. They should also ask where and how the metal gets stored and insured, and whether the seller will buy it back later at a fair price rather than a steep discount. Those terms vary more between providers than most people expect.

That same thinking carries into a conversation many advisors are already having for a different reason: the ongoing transfer of wealth between generations. Cerulli Associates estimates that roughly $124 trillion will move from one generation to the next between 2024 and 2048. Clients thinking about what they intend to leave behind are often the same clients asking why more of their portfolio isn’t in something that has held its value for centuries rather than years, and that question is worth taking seriously rather than deflecting.

Bringing The Diversification Conversation Full Circle

Retirement income planning has always meant preparing for risks that haven’t happened yet. None of these pressures are new on their own. Inflation has always been part of the equation, and so has the possibility of living longer than expected. What’s changed is how much they’re now asking of a standard stock-and-bond allocation, especially with Social Security’s future less certain than it used to be.

Adding a third, uncorrelated asset class doesn’t replace the planning work advisors already do, and it isn’t the right fit for every client or every portfolio. It gives clients another lever to pull when the other two aren’t enough, and for a growing number of retirees weighing how to protect decades of savings, that’s exactly the kind of ballast they’re looking for.