If you’re in your 60s and starting to think about retirement, there’s one risk that doesn’t get nearly enough attention. It’s not inflation, taxes, or even health care costs, though those are all important. The risk I’m talking about is timing.
When you stop working and your portfolio shifts from growing to paying you back, the market suddenly feels very different. A downturn at the wrong time - right when you’re beginning to draw income - can do more damage to your retirement than decades of careful saving can fix.
This isn’t theory. It’s called sequence of returns risk, and it’s why two retirees with the exact same savings, withdrawal rates, and long-term average returns can end up with very different outcomes. One retires into a strong market and their money lasts. The other retires into a rough patch, and they run out of money years earlier. Same savings. Same withdrawals. Just bad timing.
That’s the problem. Let’s talk about the solutions.
Cash Is Not Lazy Money
A lot of people think cash is lazy. It doesn’t earn much. It just sits there. But in retirement, cash isn’t about growth, it’s about safety.
If you’re retired and the market drops, you don’t want to be forced into selling your investments while they’re down. That’s how temporary losses turn into permanent ones. Cash is your buffer. It gives you breathing room.
Many couples I work with love knowing their next year of income is already set aside in cash. With this portion of their money they don’t care what the market is doing on a day-to-day basis, because they know their paycheck is covered. Cash buys them that peace of mind.
And yes, it’s easy to get restless when the market is soaring and you’ve got money on the sidelines not participating. But having been through enough downturns, I can tell you every client is glad they had cash during the bad times.
Cash doesn’t just protect your portfolio. It protects your confidence.
More on this topic can be found in a video I made called "Cash: a lazy investment?"
Stable Income: Building a Personal Pension
Cash can cover you for a year or so, but what about the years that follow? That’s where stable income comes in.
This is money set aside for the next 3–7 years of expenses. It doesn’t need to swing with the market. It can be in income producing investments like bonds or annuities.
Yes, I said it, the A word. If you’ve spent any time reading financial news, you’ve probably heard, “I hate annuities.” It’s become trendy to bash them. And honestly, I understand why, IF we’re talking about annuities sold as growth investments. That’s where most of the bad rap comes from. They can be expensive, complicated, and disappointing when compared to the stock market.
But here’s the truth: annuities were never designed to be growth vehicles. At their core, they’re income tools. And when used for the right purpose, they can be one of the most effective ways to create stability in retirement.
Think about what really keeps people up at night. It’s not day-to-day market swings—it’s the question, “Will I have enough money to keep paying the bills for the rest of my life?” Annuities help answer that question by turning a portion of your savings into a predictable paycheck, month after month, no matter how long you live.
Here’s how I think about it:
Bad annuity strategy: Selling them as stock market replacements or promising market-like returns.
Smart annuity strategy: Using them alongside Social Security as a personal pension that ensures your must-have bills—mortgage, groceries, utilities—are always covered.
Annuities aren’t perfect. They involve trade-offs, giving up some liquidity for stability. But for the right purpose, predictable income, they’re tough to beat. I made a video discussing this more called "I hate annuities."
Growth Still Matters
Of course, you can’t put all your money into cash and steady income. Retirement could last 30 years or more. That means you need growth too. Not to chase returns, but to keep up with inflation and preserve your lifestyle over the long haul.
The key is matching your time horizon with your investments.
Money you’ll need in the next 1–2 years? Keep it safe in cash.
Money you’ll need in the next 3–7 years? Use stable income tools.
Money you won’t touch for 7+ years? That’s your growth bucket.
This approach reframes the question. Instead of asking, “What happens if the market drops?” you can ask, “Which bucket should I draw from?” That shift creates discipline. It removes panic from the equation.
The Real Threat: Panic, Not the Market
Here’s the bottom line: the stock market doesn’t care that you’re about to retire. It will rise and fall on its own schedule. The real danger isn’t the downturn, it’s abandoning your plan when fear takes over.
Headlines are designed to stir emotion, not to guide smart decisions. “Market crash!” “Pain ahead!” If you click, they win. If you panic, you lose.
I’ve seen both paths. Retirees without a plan often feel scared into selling low, and it can take years to rebuild confidence. Retirees with a plan ride out the turbulence, keep their income steady, and sleep better at night. Same market. Different outcomes.
Your Plan Is Your Protection
Retirement isn’t about trying to predict the next downturn. It’s about building a strategy that makes the downturns irrelevant - or at least matter less.
Cash covers today. Stable income covers tomorrow. Growth covers the years beyond. And together, they keep you retired, even when the market gets bumpy.
So the next time you see a headline shouting “Sell now!” remember: headlines don’t pay your bills. Your income plan does.
If you’re approaching retirement and want to know how your plan holds up when the market gets rough, let’s talk. Because peace of mind isn’t about avoiding turbulence - it’s about being prepared for it.