Target date funds that have become popular in many retirement plans also need to take into account an investor's total capital base. Social Security is a "fabulous fixed income alternative," Bogle said. And that needs to be part of the retirement math.
Using the example of having $300,000 saved in a retirement plan and $300,000 in capital from Social Security, Bogle said if an investor has a retirement plan entirely in equities, the total retirement savings is divided equally between stocks and fixed income.
Ultimately what matters for retirement, Bogle said, is income generation.
"We're all transfixed with the movements of the stock market," Bogle said. But for retirement savers, "you should be looking at the stream of income."
Bogle said that investors should think of their retirement as the envelope they get from their retirement fund and the envelope they get from the government each month.
"That's what should matter in retirement," he added.
—By CNBC's Justin Menza. Follow him on Twitter