Wealth Preservation: How to Protect and Grow Wealth as You Approach Retirement

The Glide Path Strategy

The glide path is a predetermined schedule for reducing equity exposure as you approach retirement. The most common approach is the “gradual decline” glide path popularized by target-date funds: start at 80-90% stocks in your 30s and 40s, begin reducing around age 40, decline by 1% per year through your 50s and early 60s, and level off at 40-50% stocks by retirement. The gradual approach avoids the risk of selling stocks at the worst possible time — if you made one big shift at age 60, you might do it right before a market rally. By reducing 1% per year, you dollar-cost-average out of stocks over 20+ years. After retirement, some strategies continue the glide path down to 30-40% stocks by age 75, while others maintain a fixed allocation. Retirement income planning →

The Bucket Strategy for Wealth Preservation

The bucket strategy divides retirement assets into three time-based buckets. Bucket 1 (1-2 years of spending in cash or money market): covers immediate living expenses and avoids forced selling during market downturns. Bucket 2 (3-10 years of spending in short-to-intermediate-term bonds): provides income for the medium term and is refilled from Bucket 3 when stocks perform well. Bucket 3 (10+ years of spending in stocks): provides long-term growth to sustain the portfolio for 20-30 years. When stocks rise, you sell some stock holdings and move the proceeds into Bucket 2. When stocks crash, you spend from Buckets 1 and 2 and skip refilling until stocks recover. This structure ensures you never sell stocks during a bear market, which is the single most important rule of wealth preservation. Full bucket strategy guide →

When should I start shifting from growth to preservation?

The standard recommendation is to begin shifting 10-15 years before your target retirement date. At this point, you have enough accumulated wealth that protecting it matters more than maximizing additional growth. The shift should be gradual — reducing stock exposure by 1-2% per year rather than making abrupt changes. Some advisors recommend starting as early as age 40, especially if you have already accumulated a significant nest egg. The key markers: your portfolio is 8-10 times your annual salary, you are within 10 years of your target retirement age, and the sequence-of-returns risk starts to matter more than inflation risk. If you have a pension or other guaranteed income, you may be able to stay more aggressive. Age-based allocation guide →

How does the bucket strategy work in practice?

Bucket 1 holds 1-2 years of net spending in cash or very short-term bonds. Each year, you spend from Bucket 1 and replenish it from Bucket 2. Bucket 2 holds years 3-10 of spending in a diversified bond portfolio — short-term and intermediate-term bonds, TIPS, and CDs. Bucket 3 holds the remainder in a diversified stock portfolio. When Bucket 3 has a strong year (stocks up 15%+), you sell enough to refill Bucket 2 back to its target. When stocks are down, you skip the refill and let Bucket 2 drain toward Bucket 1. This creates a natural buffer: most people can go 5-7 years without selling stocks, which covers the vast majority of bear market recoveries. The average US bear market lasts 9.6 months; the longest was 30 months during the 2008 financial crisis. The bucket strategy is designed to survive even that worst case. Sequence-of-returns risk →

What is sequence-of-returns risk?

Sequence-of-returns risk is the danger that poor investment returns early in retirement permanently damage your portfolio’s longevity. If the market drops 20% in your first year of retirement and you are withdrawing 4% annually for living expenses, you are selling assets at depressed prices and depleting your portfolio faster than if the same drop happened 10 years later. The bucket strategy directly addresses this by ensuring you never have to sell stocks during the early years of a market downturn. Other mitigation strategies include reducing withdrawal rates during down markets, maintaining a cash reserve, using a reverse mortgage as a backup, and annuitizing a portion of your portfolio. The 4% rule was designed with sequence-of-returns risk in mind, but even 4% can fail if the sequence is bad enough. Systematic withdrawal plans →

How much should I keep in cash near retirement?

Most advisors recommend 1-2 years of spending in cash equivalents (high-yield savings, money market, T-bills) as you enter retirement. This cash reserve ensures you never need to sell stocks or bonds to pay for near-term expenses, even during a market crash. Some conservative approaches recommend 3-5 years in cash and short-term bonds combined. Beyond the cash reserve, keep 3-5 years of spending in short-term bonds and 5-10 years in intermediate bonds. The total fixed-income allocation (cash + bonds) should equal roughly 5-10 years of planned spending. For a retiree spending $60,000 per year, that means $300,000-$600,000 in fixed income, with $60,000-$120,000 in cash specifically. This provides substantial buffer against any realistic bear market. Tax-efficient fund placement →

What about inflation risk in retirement?

Inflation risk is the long-term threat to wealth preservation — even 3% annual inflation cuts purchasing power in half every 24 years. This is why wealth preservation strategies still maintain significant stock exposure (40-50%) even in retirement: stocks have historically provided the best long-term inflation protection. TIPS (Treasury Inflation-Protected Securities) provide direct inflation protection for the bond portion, and I Bonds offer additional inflation-adjusted returns. Your withdrawal strategy should include a cost-of-living adjustment to keep pace with inflation. A common approach: withdraw 4% in year one, then adjust for inflation each subsequent year. If inflation runs hot (5%+), consider temporarily reducing discretionary spending to preserve the portfolio’s real value. Balanced wealth preservation maintains growth while limiting downside. Inflation protection guide →

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