Life-Cycle Investing: Targeting a Comfortable Retirement

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Tailoring an investment strategy to phases of your life is not a new idea. But we were struck by the details of one approach developed by a leading investment management company that helps make life-cycle investing1 more clear: by allocating wealth with three strategies that vary at three different phases in life—Liquidity, Longevity and Legacy—using a so-called “3L" blueprint.

  • Liquidity, designed to assure adequate cash flow over the short term
  • Longevity, designed to perserve and grow wealth long-term
  • Legacy, directing excess capital to families (and also charities) during and after the investor’s lifetime

While this broad-brush approach was formulated for high net worth investors, we believe that its principles can be applied with some modifications to a broader group of investors, and points to some interesting applications for people in or near retirement.

A closer look at the “3L" blueprint

The UBS chart below (Figure 1) shows how the relative weights of the three strategies might vary over time for a hypothetical (high-net-worth) investor. Of course, it would look different for other investors.

The Liquidity strategy, structured to meet short-term expenses, should be conservatively allocated to cash equivalents and short-term bonds.

The Longevity strategy, focused on maintaining and building wealth, particularly in an investor’s middle years, typically emphasizes stocks, longer-term bonds, other higher risk assets, and protective resources like insurance.

The Legacy strategy, for those investors who find themselves with more capital than they need to maintain their own lifestyles, especially in their later years, can allocate aggressively, since its goal of providing for others is usually long-term.

The life-cycle phases

As approximations, we think of “Early Career” as investors between their 20s and mid-30s, “Mid Career” for mid-30s through early 50s, “Late Career” between the mid-50s and mid-60s, and “Retired” as investors from their mid-60s on.


  • Each of the strategies is represented throughout an investor’s life cycle, to different degrees.
  • Liquidity becomes more important in retirement, since having ready money to meet expenses can be challenging after earned income terminates.
  • Allocation to the Longevity Strategy peaks in the Late Career years—when growth of capital for many needs, including preparation for retirement, is most important.
  • For fortunate retirees who can earmark gifts to their families and philanthropic causes, the Legacy Strategy becomes dominant. And so for retirees who are sure they have enough allocated to Liquidity, taking more risk rather than less with the remainder of their assets can make sense—a counterintuitive conclusion.
  • Figure 1
  • The chart below demonstrates the relative size of each "3L" strategy for a hypothetical high net worth investor, and how the resources underlying each strategy change throughout the investor's lifecycle.

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