The greatest retirement fear isn't market crashes - it's your savings disappearing while you still need them. This guide explains how to evaluate your portfolio's durability against 30+ year retirements, inflation surges, and healthcare shocks.
The 5 Risk Factors
1) Longevity: Living to 95 requires 35-year planning. 2) Healthcare inflation: Rising 5-7% annually vs 3% general inflation. 3) Market sequences: 2008-style drops in early retirement. 4) Fixed income trap: Bonds/CDs losing to inflation. 5) Family obligations: 25% of retirees support adult children. Stress test: $1M portfolio with $40,000/year withdrawals fails 28% of historical scenarios over 35 years.
Protection Strategies
1) Bucket system: 3 years cash, 7 years bonds, rest in growth assets. 2) Dynamic withdrawals: Reduce spending 10% in down years. 3) Guaranteed floor: $20,000/year annuity covers basics. 4) Home equity: Reverse mortgage line of credit for emergencies. 5) Work optional: $15,000/year part-time work reduces failure risk by 40%.
Calculator Method
Use the 3% rule instead of 4% for retirements starting before 60. Example: $1.5M × 3% = $45,000 first-year withdrawal. The birthday rule: At 70, reduce equity to (110 - age)%. The 10% cushion: Keep 10% portfolio in cash equivalents after 75 for medical emergencies. Required Minimum Distributions: Plan for mandatory 401(k) withdrawals starting at 73 (3.65% at 75).
Key Takeaways
Your savings can outlive you with proper planning. Combine growth investments (50-60% equities even in retirement) with spending flexibility (10-15% adjustable expenses). Annual check-ups - reducing withdrawals 5% after bad market years - increase success rates from 75% to 90% in historical testing. Remember, perfection isn't required - just course correction when needed.