Why Smart Planning Matters Now More Than Ever
The past few years have been a whirlwind for retirees and investors. After nearly two decades of low inflation and relatively calm markets, the post-pandemic world has brought economic surprises that few saw coming: surging inflation, sharp interest rate hikes, and significant market volatility.
This new environment has shaken the foundations of traditional retirement planning. What used to be set-it-and-forget-it strategies now feel outdated—or even dangerous. So, what does this mean for retirees and those nearing retirement? It means the threat level is high, but with the right strategy, peace of mind is possible.
Retirement is not the end of your financial life; it’s the beginning of a new phase in it. Your golden years are a time when planning becomes extremely important, because there are a number of serious threats to the security of your lifestyle, and you won’t have the income from your job to protect you. As you review these threats below, remember that they can all exist at the same time.
The Top 5 Threats to Retirement Income (and How to Handle Them)
Timing risk. Retiring during a market downturn is one of the worst-case scenarios. Imagine withdrawing 4% annually from your portfolio, only to have markets drop 30%. That 4% becomes almost 6% overnight—an unsustainable draw. Unfortunately, market downturns aren’t rare; corrections happen every 1.8 years on average. Your retirement income strategy must anticipate and plan for early market volatility.
Inflation. Inflation is the silent killer of purchasing power. Even at the Fed’s 2% target, inflation can cut your dollar’s value in half during your retirement years. Retirees feel this most acutely in everyday expenses, such as groceries, healthcare, and housing. That’s why your plan must include inflation-hedging assets like stocks, real assets, and TIPS, as well as income sources that adjust for cost-of-living increases.
Longevity risk. We’re living longer than ever, which means your money has to stretch further. One in five retirees will live past age 95, but many plans only account for income through age 85 or 90. A smart retirement plan assumes you’ll live to 95 or even 100 and includes reliable income sources like pensions, annuities, and Social Security delay strategies.
Risk drift. As we age, our ability and willingness to handle investment risk naturally decline. That’s why your portfolio should gradually shift from growth-focused to more stable, income-generating assets. Relying on the same strategy at age 85 that you used at 65 isn’t just unrealistic—it’s risky.
Market timing. Markets are volatile, and humans are emotional. This combination often leads to poor decisions like panic-selling at market bottoms. A successful plan must anticipate these tendencies and include behavioral guardrails, like structured income plans and buffers that separate emotional decision-making from market fluctuations.
Many retirees use systematic withdrawals (like the 4% rule) or bucket planning (dividing different types of assets by time horizon). These methods can work, but they don’t fully address all five retirement threats.
Systematic withdrawals fail in early down markets. Bucket strategies often lack flexibility and don’t account for changing risk tolerance. Both can lead to premature depletion or emotional investing mistakes.
A Smarter Approach: Time Optimized Planning™ (TOP)
We use a strategy called Time Optimized Planning™ (TOP)—a dynamic, adaptive approach that addresses all five risks. Rather than making a plan at 65 and sticking with it forever, TOP adjusts annually based on market performance and your life circumstances.
TOP has the built-in flexibility to withdraw income from the best-performing assets each year, thereby avoiding selling low. Through this annual rebalancing, TOP seeks to maintain several years of spending in low-risk assets by withdrawing from stock investments in years the market is up, and from cash during down markets.
Unlike bucket planning, in which retirees are gradually moved into a riskier position over time, TOP reduces stock exposure as you age, thus accounting for humans’ natural desire for more certainty as they age.
TOP is an empathic approach to retirement planning. It has built-in behavioral buffers, helping you avoid making costly emotional decisions during market turmoil. Trying to time entry and exit points into stocks is notoriously difficult—and historically expensive.
TOP also has a fail-safe feature: it segregates legacy assets for heirs and charity into growth-oriented investments, while focusing retirement funds on stability. This can create a greater legacy while providing the peace of mind that extra funds are available if needed.
If the past few years have taught us anything, it’s that the world changes fast, and your retirement strategy should be able to change with it. That’s why we built Incomize™, our retirement income solution. It’s part of our Family Office services and includes a complimentary, customized retirement income report tailored to your unique situation.
Let’s talk. There’s no cost or obligation—just clarity.
