You’ve spent decades building your portfolio. You’ve stayed disciplined through market swings, held your ground when others panicked, and watched your wealth grow. So why would the same approach that got you here need to change now?
Because the rules of the game change when retirement moves from a distant goal to a near-term reality.
For most of your working years, market downturns were something to lean into. The common wisdom — buy, accumulate, stay the course — served you well. A dip in your 30s or 40s wasn’t comfortable, but it was manageable. You had time on your side.
As retirement gets closer, that calculus changes.
The strategies that helped you build wealth may need adjustment — your pre-retirement investing strategy looks different from the one that got you here. In your early 60s, the focus begins to shift from growing the pile to living off of it, and that transition calls for a different kind of thinking.
This is what financial planners call the “retirement risk zone”: a critical window, typically the five to ten years before and after retirement, when your portfolio is often at its peak, and the timing of market volatility matters more than it ever has before. A significant downturn early in retirement can have lasting effects on how long your assets last, which is why understanding this phase is so valuable.
Context is everything here. The strategy that made sense two decades ago may not work today. Knowing where you are in this window and planning accordingly puts you in a much stronger position to retire with confidence.
Why Your Pre-Retirement Investment Strategy Needs to Shift
Retirement isn’t just a financial milestone — it’s the payoff for decades of discipline. And the closer it gets, the more worthwhile it becomes to make sure your strategy reflects where you actually are, not where you were ten or twenty years ago.
The good news is that adjusting your approach at this stage isn’t a concession. It’s smart planning. Taking a clear-eyed look at what this phase requires sets you up to make confident decisions — and to enter retirement on your terms.
The “retirement risk zone” isn’t a phrase I coined, but it’s a smart one. It generally refers to the five to ten years before and after retirement—roughly ages 55 to 75. During this window, speculative investment strategies tend to carry more risk, simply because there’s less time to recover from a significant loss. Once you retire, you’re no longer contributing new earnings to offset market losses. Your investments are now doing the heavy lifting.
This phase is different from your accumulation years. Your portfolio is often at its peak value, and that’s precisely why your strategy deserves a second look. One key risk to understand here is sequence-of-returns risk: if you’re withdrawing from your portfolio during a market downturn, losses can compound in ways that make recovery harder even after markets bounce back. [1]
The good news? Awareness, preparation, and experienced guidance can help preserve it and keep your plan on track through whatever the market brings.
Sequence of Returns Risk: Why Timing Matters More Than You Think
During the working years, market downturns can be frustrating, but often beneficial. Regular contributions mean a bear market is actually an opportunity to buy shares at lower prices. When time is on your side, volatility can work in your favor.
Near retirement, that dynamic shifts.
Imagine a couple at 45 with $500,000 invested. The market drops 20%. Painful? Yes. Permanent? Not necessarily. They’re still earning, still contributing, and have 20 years for recovery.
Now picture a couple at 62 with $1.8 million preparing to retire next year. The market drops 20%, and they begin withdrawing $80,000 annually. That early loss, combined with withdrawals, leaves fewer assets to participate in the rebound. Even if average returns over 20 years look “normal,” the sequence of those returns can permanently change the outcome. Averages can be misleading because timing matters more once withdrawals begin.
That’s sequence-of-returns risk in plain English: early losses combined with withdrawals shrink the base you’re counting on to grow. This is why your retirement portfolio withdrawal strategy matters as much as how you invested during your accumulation years.
The real-world impact? Delaying retirement. Reducing lifestyle. Increasing the odds of outliving your assets. And when fear kicks in, people often make reactive decisions that compound the damage. [2]
So, should you just move everything into bonds and play it safe?
Not necessarily.
People are living longer these days than their grandparents. Inflation erodes purchasing power. And low yields may not generate the income you need for 25 or 30 years of retirement. Simply becoming ultra-conservative can create a different risk—the risk of not keeping pace. [3]
This is really about balance: growth, preservation, and reliable income working together inside a coordinated plan.
Big-Picture Guardrails for the Retirement Risk Zone
Planning well during the retirement risk zone comes down to a few key principles. Here’s where to focus.
First, plan for volatility rather than assuming markets will cooperate perfectly. That might mean working a bit longer if you’re able, especially during peak earning years, to strengthen your foundation before withdrawals begin. Even in early retirement, continuing to invest thoughtfully can help offset distributions.
Diversification matters more here than it has in a while. A balanced mix of equities (stocks) and high-quality fixed income (bonds and similar investments) can help manage volatility while still allowing for growth. Asset allocation — how your portfolio is divided across investment types — should reflect not just your age, but your short-term income needs. If you’ll need money in the next few years, that portion shouldn’t be exposed to unnecessary market risk.
Cash reserves are equally important. Having one to three years of living expenses outside your investment portfolio reduces the pressure to sell during a downturn and gives your longer-term assets room to recover.
Flexibility also plays a role. Delaying large purchases, adjusting discretionary spending, or being strategic about when you claim Social Security can all improve long-term sustainability.
And regular reviews with your advisor matter more than most people realize. Retirement isn’t a “set it and forget it” phase. It requires ongoing coordination — retirement income planning, tax strategy, investment management, and contingency planning all work together.”
You won’t eliminate risk altogether. But you can build smart guardrails around it so your retirement isn’t dependent on perfect timing.
Don’t Navigate This Window Alone
The retirement risk zone is something to prepare for, not fear. The investors who navigate it well aren’t necessarily the ones who predicted the market. They’re the ones who had a plan and stuck to it.
If you’re anywhere near this window or if you’re already in it, the best time to review your strategy is before volatility forces your hand. Because when uncertainty hits — and it will — you want clarity, not chaos.
You’ve spent years building what you have. The goal now is to make sure it lasts. That doesn’t happen by accident. It happens with intention, guidance, and a plan built around your life. If you’re not sure where to start, our free retirement planning workbook is a good first step.
Sources:
1. https://www.investopedia.com/terms/s/sequence-risk.asp
2.https://smartasset.com/retirement/retirement-risk-zone
3. https://www.theguardian.com/society/2024/oct/07/baby-boomers-living-longer-but-are-in-worse-health-than-previous-generations
This material has been edited with the assistance of artificial intelligence tools. The information presented is based on sources believed to be reliable and accurate at the time of publication. This material is for educational purposes only and does not necessarily reflect the views of the author, presenter, or affiliated organizations. It should not be construed as investment, tax, legal, or other professional advice. Always consult a qualified professional regarding your specific situation before making any decisions.
There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
Asset allocation does not ensure a profit or protect against a loss.
Investing in securities involves a significant risk of loss that clients should be prepared to bear. There is no guarantee that the investment strategy discussed will be successful or achieve its objectives. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment will be profitable for a client’s portfolio.
Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise. Bonds are subject to availability, change in price, call features and credit risk. Bond yields are subject to change. Certain call or special redemption features may exist which could impact yield.