Two retirees can earn the same average return for thirty years and end up hundreds of thousands apart. The difference isn't the average — it's the order. A bad market in your first five retired years, combined with withdrawals, does damage no later bull market fully repairs.
Average returns lie
A portfolio that falls 20% needs a 25% gain just to break even — and if you're also withdrawing 4% a year, you're selling the most shares at the worst prices. Retiring into 2008 versus 2012 produced wildly different outcomes from identical starting balances. Your plan must survive the bad draw, not just the average one.
The cash wedge
Our answer is boring on purpose: keep roughly two years of spending in cash and short-term bonds, separate from the growth portfolio. In a down year, you spend from the wedge instead of selling stocks. When markets recover, you refill it. Clients who lived through 2008 and 2020 with a wedge never sold a share low — and slept noticeably better.
Guardrails, not guesses
Beyond the wedge, we set withdrawal guardrails: a base spending level, a raise in good years, and a pre-agreed trim if the portfolio falls 15% below plan. Deciding the rules while markets are calm means you never make them while markets are screaming.
The takeaway
If you're within five years of retiring, your plan needs a bad-markets chapter — wedge, guardrails, and all. Ask us to stress-test yours against a 2008-style start.
