Investing for retirement and investing IN retirement are not the same game. The scoreboard changes, the rules shift, and the consequences for poor decisions multiply.
Multiply.
The approach during your working years is simple: accumulate. Save steadily, invest in a diversified portfolio, and ride out volatility. If markets drop, you buy more shares at a discount. There’s time to recover.
But in retirement, the math flips. What got you to retirement might not be the right approach to get you through retirement.
But, here at Consolidated Planning, our decades-long experience in planning has equipped us to plan for the needs leading up to retirement AND through retirement.
In this article, we’ll help you understand your returns risk, why timing and market volatility matter to fund your lifestyle without avoidable risk all so you can protect your investments throughout your retirement.
The Sequence of Returns Risk Matters
The term “sequence of returns risk” sounds academic, but the concept is really straightforward: the order in which you experience investment gains and losses matters.
A 20% decline early in retirement, when you’ve just started drawing from your portfolio, hurts far more than the same drop later. That’s because withdrawals lock in losses. You’re selling more shares to meet the same income need, and those shares are no longer in the portfolio to benefit from a future recovery.
This risk doesn’t exist during the accumulation years. If the market drops while you’re contributing, you’re buying more shares at lower prices. This is called “dollar cost averaging” – and can be a way to benefit from the ups and downs of the financial markets.
But here’s the thing, you’re doing the opposite in retirement. You’re selling shares regardless of price. And that same volatility that helped you accumulate your retirement nest egg can take it away in retirement.
The Retirement Red Zone
The five years before and after your retirement are often called the “retirement red zone.” Poor market performance during this window can potentially have a negative effect on your financial future. Think the financial equivalent of fumbling on the goal line.
The red zone.
According to research by Morningstar, even with identical long-term returns, simply varying the order of market returns can cause sustainable withdrawal rates to vary from under 3% to over 6%, even when the average return is the same.
To be clear, this is not a debate about average returns. It’s one about recognizing timing and the impact of volatility on your retirement success.
If you’re a retiree who ignores this risk, you may spend far less than you could out of fear — or conversely, run out of money before you run out of life.
You’re Investments Are No Longer For Growth
As you may be gathering, the purpose of investing shifts in retirement. It’s no longer about maximizing growth – it’s about funding a standard of living without avoidable risk.
That means income planning takes center stage. Just like how a balance sheet is organized, aligning reliable income streams (assets) with future expenses (liabilities) matters more than chasing returns.
It’s not enough to set it and forget it, hoping that average market returns will be good enough when you need to cover spending today. You’re no longer aiming to outperform the market. You’re aiming to avoid regret.
Liquidity Does Not Equal Freedom
Having ready access to your money is a great feeling. You can move things around, change your investments with the click of a button, and switch horses mid-race if your plans change. But in retirement, the desire for flexibility can lead to trouble.
We want to be clear that just because an asset is “liquid” does not mean it’s available for use. If it’s earmarked for essential expenses — like next year’s property taxes or five years of planned withdrawals — it’s not truly accessible without incurring some trade-off.
This is called “technical liquidity.” So, yes, technically, you can sell and retrieve your cash at a moment’s notice, but not without cost or consequence.
True liquidity is different. It’s money that isn’t tied to a specific goal. It’s what you can spend without impacting the rest of the plan.
Retirees can easily misjudge how much of their portfolio is truly flexible or overestimate their need for true liquidity. Does 100% of your money need to be 100% liquid 100% of the time? These missteps can lead to anxiety, hesitation, or poor timing when accessing funds.
The good news is, it doesn’t have to be this way. Matching income sources and assets to future spending liabilities helps fix this. A more efficient approach to sourcing retirement spending from the investment portfolio can cover more retirement risks and leave more available to fund unplanned spending.
This is why a properly designed plan can help clarify what’s safe to spend and from which sources, and what must stay untouched to cover future spending. That clarity often helps people become more confident retirement spenders — and better stewards of their long-term goals.
Replace Your “Number” With A Living Standard
Retirement planning has been dominated by one question: “What’s your number?” That single, static target — often a large round number — becomes the singular focus of a career spent saving.
But that question is the wrong question.
So, what’s a better approach, you ask? Planning based on spending goals, not account balances. Decisions based on maintaining a stable living standard, rather than trying to hit a single, arbitrary savings milestone, can better inform how your money should be invested in retirement.
It’s not how big the number is. It’s how safely and predictably you can spend it.
When you’re retired, you don’t want every dollar of income to be exposed to the volatility of the financial markets. Lifetime income sources — Social Security, pensions, and certain types of annuities — can be orchestrated to form a “spending floor” for your lifestyle. Regardless of what markets do, they can cover your essential spending for as long as you live.
Protection For Your Investments
Retirement is not about earning a specific rate of return or investing to “beat the market.” It’s about removing the pressure that spending places on the investment portfolio to whatever extent possible by adding other means to spend more safely.
Insurance protection isn’t just for replacing assets — it can improve financial efficiency.
In his international best-seller, Permission to Spend, author Tom Wall, Ph.D., explains the benefits of including certain “buffer assets,” like the accumulated cash values of participating Whole Life insurance, in a retirement portfolio. By drawing on these assets after years when markets are down, retirees can avoid selling investments at a loss, reducing sequence risk. He calls it “your permission slip to spend with confidence.”
Just like you would never buy a sports car without brakes, adding protection to your investment portfolio can allow it to operate more efficiently.
Spend Sooner, Not Just Later
One of the most unfortunate side effects of not engaging in retirement income planning soon enough is underspending out of fear. People save diligently for decades but then hesitate to spend what they’ve accumulated. It’s not irrational—there’s uncertainty about longevity, healthcare costs, market returns, and other retirement risks.
But that fear can rob people of their most active, meaningful years.
Building a retirement income strategy that increases confidence, whether through adding additional lifetime income, better asset alignment with future spending objectives, or simply a clearer understanding of how long funds can last when a plan is crafted to support your unique goals and objectives, helps people enjoy happier, less stressful retirements.
Align Your Investments With Your Post-Retirement Spending Goals
From builder to spender. From growth-seeker to risk-manager. From saver to steward.
Retirement isn’t your finish line — it’s halftime. And it’s no longer a rate of return problem but a risk management one.
So treat it that way.
Accumulating wealth and distributing it in retirement are fundamentally different but the right plan gives you the necessary shift to your mindset.
To start spending more confidently with an investment strategy that aligns with your objectives, talk with an advisor at Consolidated Planning.
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Exp. 6/2027
Guardian, its subsidiaries, agents and employees do not provide tax, legal, or accounting advice. Consult your tax, legal, or accounting professional regarding your individual situation. The information provided is based on our general understanding of the subject matter discussed and is for informational purposes only.
This material contains the current opinions of James M. Matthews and Consolidated Planning only. These are not the opinions of Park Avenue Securities, Guardian, or its subsidiaries.
Registered Representative and Financial Advisor of Park Avenue Securities LLC (PAS). Securities products and advisory services offered through PAS, member FINRA, SIPC. Financial Representative of The Guardian Life Insurance Company of America® (Guardian), New York, NY. PAS is a wholly owned subsidiary of Guardian. CP Planning Group, Inc. is not an affiliate or subsidiary of PAS or Guardian.
