This article was updated on Feb. 7, 2017, and originally published Jan. 6, 2016.

If Warren Buffett weren't the world's best stock picker, how would he plan for retirement?

Luckily for the rest of us, he's answered this question before. In an annual letter to shareholders, Buffett laid out a retirement plan that would take just minutes to implement in a 401(K) or IRA. He believes in it so much that his own money will ride on it. It's the plan for managing the wealth he'll leave behind to his wife:

My advice to the trustee could not be more simple: Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund. (I suggest Vanguard's. (VFINX)) I believe the trust's long-term results from this policy will be superior to those attained by most investors -- whether pension funds, institutions, or individuals -- who employ high-fee managers.

Buffett suggests the Vanguard S&P 500 index as one of the best funds for investing in U.S. stocks. And although he doesn't offer up a specific suggestion for short-term government bonds, the Vanguard Short-Term Government Bond Index Fund (VSBSX) fits the basic requirements.

It's hard to explain just how cheap these funds really are. If you were to invest in Vanguard's lowest-cost share classes as Buffett recommends, you'd pay a mere $5.20 in fees for every $10,000 you invest. By contrast, investors who invest in the same stock-and-bond mix with actively managed funds would pay about 15 times more, according to data from the 2016 Investment Company Fact Book.

Alarm clock on green background

Buffett's retirement plan is simple to implement and inexpensive. Image source: Getty Images.

Buffett's simple fund portfolio

Buffett has long been a fan of index funds, once placing a $1 million bet for charity that index funds would beat a group of hedge funds managed by sophisticated investors. His rationale for favoring index funds is relatively simple: The average market participant will only earn a return equal to the market average minus fees. Fees are the only input you can control with certainty. The lower the fees, the more likely you are to earn a higher return.

At the 2004 annual meeting with his investors, he said, "Among the various propositions offered to you, if you invested in a very low-cost index fund -- where you don't put the money in at one time, but average in over 10 years -- you'll do better than 90% of people who start investing at the same time."

And while Buffett's portfolio may be pretty simple -- most investors hold more than only two funds -- the underlying message is important. Simplicity works. Studies by S&P routinely confirm that over multi-year periods, higher-cost actively managed funds fail to outperform. In a 2016 study, fewer than 18% of large-cap stock funds kept pace with the S&P 500 index over the preceding 10-year period.

For individuals, the most important part of the personal finance pie is not financial at all. It is behavioral. It is the ability to invest regularly, and ignore the desires to sell in fear of loss or change your buying when you fear missing out on the next bull market. 

Perhaps the best anecdote of the consequences of investor behavior comes from the legendary investor Peter Lynch. As manager of the Fidelity Magellan fund, he generated average annual returns of 29% per year over his 14-year tenure. The average investor in the fund, however, managed to lose money -- selling the fund at its lows and buying high.

With this in mind, the best retirement plan might just be the one so unsexy, and so uninteresting, that you can set it up and ignore it. Buffett's two-fund plan is just boring enough to work.