Most conversations about retirement risk begin with investments.
Stocks versus bonds. Growth versus income. Aggressive versus conservative.
Those questions matter, but they aren't always where retirement risk begins.
More often, it starts with something we call withdrawal burden—the amount of income your portfolio is expected to provide each year.
Imagine two retirees who each have a $2 million portfolio.
One withdraws $40,000 annually because Social Security and perhaps a pension cover much of their spending.
The other withdraws $180,000 from the same-sized portfolio.
Nothing about the investments has changed.
But everything about the plan has.
A portfolio carrying a larger withdrawal burden has less flexibility when markets decline. Income still has to be generated, even if prices are temporarily lower. Selling investments during those periods permanently reduces the number of shares available to participate in a future recovery.
That risk doesn't come from owning stocks.
It comes from what the portfolio is being asked to accomplish.
This is also why we tend to question age-based investment rules.
An investor who is 80 years old but rarely needs to touch investment assets may be able to tolerate more growth than someone who is 62 and depends heavily on monthly withdrawals.
The retirement plan—not a birthday—should drive those decisions.
When we sit down with clients, one of the first questions isn't, "How are you invested?" It's, "What role does this portfolio play in your retirement?"
How much income must it provide? How flexible are your expenses? What other income sources exist?
Those answers usually tell us much more about appropriate investment strategy than an age-based questionnaire ever could.
Retirement planning works best when investments are built around the plan—not when the plan is forced to fit the investments.
