Finance

BlackRock cautions buying and holding the S&P 500 is no longer enough for retirement. What they say to do instead to generate a ‘paycheck for life’

Moneywise · Jul 11, 2026 11:35 · 9 min read

BlackRock: Index funds alone may not be enough

“There needs to be an evolution away from this being indexed only.”

For decades, index funds have been the gold standard for retirement investing. Cheap, diversified and easy to manage, they’ve helped millions of Americans adopt a simple buy-and-hold strategy built around broad-market indexes.

But the world’s largest asset manager is now warning that relying on index funds alone may no longer be enough.

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“There needs to be an evolution away from this being indexed only,” Nick Nefouse, global head of retirement solutions at BlackRock, said in a phone interview with Bloomberg (1). “The markets are evolving to a point where there needs to be more oversight.”

BlackRock [NYSE:BLK] says rising market concentration, geopolitical volatility and longer retirements are forcing investors to rethink their traditional portfolios.

The firm manages nearly $14 trillion globally (2), with about $5.5 trillion in ETF assets through its iShares platform (3).

According to BlackRock, the next generation of retirement investing may look very different from the classic strategy of simply buying an S&P 500 index fund and waiting.

Why BlackRock thinks the index-only strategy is breaking down

BlackRock argues several trends are reshaping the investing landscape.

One of the biggest is market concentration. In recent years, a handful of large technology companies have accounted for an outsized share of stock market gains, leaving major indexes increasingly top-heavy.

At the same time, global volatility has increased. Geopolitical tensions, inflation cycles and interest-rate uncertainty have created more unpredictable market conditions.

Another challenge is longevity risk. The average American’s life expectancy is 79 years (4). As retirees live longer, their portfolios may need to generate income for decades.

Instead of focusing solely on building a nest egg, BlackRock says investors may need portfolios designed to deliver a steady stream of income — a potential shift toward a “paycheck for life” model in retirement.

BlackRock is not the only asset manager moving in this direction.

The Wall Street Journal reports that around 4% of 401(k) plans now offer a target-date fund with an annuity — an insurance contract that generates regular income payments in retirement (5).

This option wasn’t widely available until the last few years, suggesting demand for pension-like retirement income streams is gaining traction. While BlackRock already offers a target-date fund with an annuity, both Vanguard and Fidelity recently announced plans to do the same.

The big shift: Private markets inside retirement accounts

Beyond annuities, one of BlackRock’s proposed solutions is to expand access to private-market investments within retirement plans.

The firm has suggested that future target-date funds could include assets such as private credit, infrastructure investments and private equity alongside traditional stocks and bonds.

Private markets have grown rapidly in recent years. Global private equity assets alone reached a record $10.6 trillion at the start of this year (6).

Bloomberg’s reporting suggests that BlackRock is exploring retirement products that incorporate these types of investments, potentially bringing institutional-style assets into everyday portfolios.

The shift could benefit asset managers

Not everyone is convinced the move away from index-only portfolios is purely about improving outcomes for investors.

Index funds often charge just a few basis points in annual fees. Actively managed funds and alternative investments typically carry higher fees — a difference that can significantly impact returns over time for the average investor.

Expanding active management could also benefit asset managers themselves, since active funds typically charge higher fees than passive index trackers.

According to Morningstar, only 38% of U.S. actively managed funds outperformed their average indexed peers in 2025 (7). The performance gap is mostly attributable to the cost difference between the two. Index funds typically charge 0.03%-0.2% in fees, whereas actively managed funds cost 0.5%-1.5% or more (8).

Over time, even small fee differences can compound dramatically. For example, a $100,000 portfolio earning 7% annually for 30 years could grow to about $739,000 with a 0.1% fee (a net return of 6.9%), but only $574,300 with a 1% fee (a net return of 6%). That’s a $164,700 difference, driven entirely by costs.

Princeton economist Burton Malkiel, author of the investing classic A Random Walk Down Wall Street, makes similar arguments in his book, writing that “two-thirds of professionally managed funds are regularly outperformed by a broad capitalization-weighted index fund with equivalent risk (9).”

What does that mean for everyday investors?

The takeaway isn’t that index funds suddenly stopped working. They still work as the foundation of a long-term portfolio, particularly for younger investors.

But as markets become more concentrated and retirement stretches longer, investors may want to look beyond the traditional 60/40 stock-and-bond mix. No matter who benefits most from the move, diversification is the key to protecting yourself from market volatility.

For example, some investors are exploring new portfolio frameworks that include alternative assets alongside stocks and bonds. One model gaining attention is a 50/30/20 allocation — 50% stocks, 30% bonds and 20% alternative investments.

That shift is one reason investors are experimenting with ways to add income-producing or nontraditional assets to their investments.

Here are a few options worth considering:

1. Private real estate

Institutional investors have leaned heavily into the real estate sector for years. In fact, real estate accounted for 11% of family offices’ portfolios last year, according to UBS (10).

It’s easy to see why. In addition to potential price appreciation, rental properties can generate steady income.

Today, new investment platforms are making it easier for everyday investors to gain exposure to the asset class — even without buying a property outright.

You can tap into this market through platforms like Arrived.

Backed by world-class investors, including Jeff Bezos, Arrived allows you to invest in shares of vacation and rental properties, earning a passive income stream without the extra legwork that comes with being a landlord of your own rental property.

To get started, simply browse through their selection of vetted properties, each picked for their potential appreciation and income generation. Once you choose a property, you can start investing with as little as $100, potentially earning monthly dividends.

Once you’re an investor with Arrived, you’ll gain access to their newly launched quarterly secondary market, where investors can buy and sell shares of individual rental and vacation rental properties directly on the platform.

This allows you to buy into properties you may have missed at the initial offering or sell shares before a property reaches the end of its hold period.

With access to more than 400 properties in 60 cities, this new way to trade real estate offers flexibility and opportunities to gain access to more properties each quarter.

And the best part? For a limited time, when you open an account and add $1,000 or more, Arrived will credit your account with a 1% match.

Another way to invest in fractional real estate

For investors interested in a similar approach, but focused on institutional-quality rental homes, other platforms offer to fill the gap.

Mogul is one example of a real estate investment platform offering fractional ownership in blue-chip rental properties. Their system gives investors monthly rental income, real-time appreciation and tax benefits — without the need for a hefty down payment or 3 a.m. tenant calls.

Founded by former Goldman Sachs real estate investors, their team handpicks the top 1% of single-family rental homes nationwide for you. Simply put, you can invest in institutional-quality offerings at a fraction of the usual cost.

Each property undergoes a vetting process that requires a minimum 12% return even in downside scenarios. Across the board, the platform features an average annual IRR of 18.8%. Their cash-on-cash yields, meanwhile, average between 10% and 12% annually. Offerings, with investments typically ranging between $15,000 and $40,000 per property.

Every investment is secured by real assets and isn’t dependent on the platform’s viability. Each property is held in a standalone Propco LLC, so investors own the property — not the platform. Blockchain-based fractionalization adds a layer of safety, ensuring a permanent, verifiable record of each stake.

Getting started is quick and easy. You can sign up for an account and then browse available properties. Once you verify your information with their team, you can invest like a mogul in just a few clicks.

2. An asset favored by the ultrarich

While investing in alternative assets like real estate can be a solid long-term strategy for diversification, other asset classes merit a closer look.

One such asset has posted positive returns over the last 20 years, highlighting strong long-term investment potential. And with its moderate correlation with the movements of traditional markets, this alternative investment could help protect against inflation, especially amid current geopolitical uncertainty.

That’s perhaps why this asset has long been favored by the ultrawealthy as a resilient and lucrative addition to their portfolios. With an estimated value of over $2.5 trillion — projected to reach nearly $3.5 trillion by 2030 — it represents a massive asset class, according to Deloitte (11).

You might be surprised to find out this asset is fine art.

Until recently, this world was off-limits, thanks to a complex network of appraisers, curators and brokers — not to mention the raw capital needed to purchase a piece of exceptional art. Now, with Masterworks, you can buy fractional shares in multimillion-dollar works by icons like Banksy, Picasso and Basquiat. While art can be illiquid and typically requires a long-term hold, it can offer unique portfolio diversification.

Masterworks has sold 30 artworks so far, yielding net annualized returns like 14.6%, 17.6% and 17.8%.*

Even better, if you’re interested in art you can skip the waitlist and go straight to investing.

*Past performance is not indicative of future returns. Investing involves risk. See important Regulation A disclosures at Masterworks.com/cd.

3. Gold

Gold has served as a store of value for thousands of years and it’s become a key player in diversified portfolios today. Recent research from the World Gold Council reveals that adding a small allocation of gold to a portfolio can help improve risk-adjusted returns (12).

And during periods of high inflation or financial instability, the metal has historically served as a hedge against currency depreciation and market volatility.

If you’re curious about adding precious metals to your broader inflation-hedging strategy, a gold IRA from Goldco lets you hold physical gold and other metals while still getting the tax advantages of an IRA.

Goldco is widely regarded as one of the leading companies in the space, with a 4.8/5 rating on Trustpilot and an A+ from the Better Business Bureau. They also offer a guaranteed buyback program, meaning they’ll repurchase your metals at the highest price according to market value if you ever decide to sell.

If you want to explore whether precious metals could be a helpful hedge for your portfolio, download Goldco’s free gold and silver guide to see if it’s a good fit for you.

The bottom line

BlackRock’s message isn’t necessarily that index investing is broken, nor should investors consider it to be. But amid rising costs and market volatility, the retirement landscape is changing.

For decades, passive index investing has helped millions of Americans build wealth. It still can. But as markets grow more complex and retirement gets longer, the world’s largest asset manager is betting that investors will increasingly need to look beyond tradition to keep afloat.

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BlackRock cautions buying and holding the S&P 500 is no longer enough for retirement. What they say to do instead to generate a ‘paycheck for life’

Must Read

Why BlackRock thinks the index-only strategy is breaking down

The big shift: Private markets inside retirement accounts

The shift could benefit asset managers