In Part I, we walked through the power of long-term investing—the discipline of saving consistently, staying invested, and letting time do the heavy lifting. We followed a thirty-year journey where a hard-working employee contributed $462,500 to their 401k and invested 100% in the S&P 500 index. Despite the volatility, they watched their retirement grow to more than $2.4 million. That is the reward of staying the course during the accumulation phase.
But now the script flips.
Now our hypothetical employee is transitioning into retirement. They are no longer contributing to their future and instead, withdrawing from it.
You will see that when that shift happens, the rules change dramatically. What once worked in your favor—time, compounding, and volatility—can begin to work against you. That’s because when you retire, the need shifts from growth to income. From accumulation to conservation. From building wealth to drawing from it.
Retirement, as you will see, is not just about generating income from your investments. It is about managing risk and mitigating losses, especially in the early years. It’s called sequence risk. Once the income starts flowing out, timing still matters - maybe more than ever – but this time, it can work against you.
Lesson's From History
Let’s start by looking at one of the most damaging examples of bad timing in market history: the 1973–1974 bear market. Today it’s the “magnificent seven” that are driving the big returns of our stock market - back in 1972 it was the “Nifty Fifty.”
These were the market darlings of the day—companies like Kodak, Polaroid, Avon, Xerox, and IBM. Investors believed these blue-chip names were untouchable, the kind of companies you could buy and hold forever. The narrative was that their size and dominance would shield them from downturns. Sound familiar? Apple, Nvidia, Meta… But as inflation surged and the economy sank into stagflation, many of these once-revered giants collapsed in value—and some never recovered.
But no one saw it coming back in January of 1973, so those who entered retirement with concentrated exposure to these so-called safe stocks learned a hard lesson. Asset allocation matters. Risk is largely misunderstood. What looked like a rock-solid retirement plan turned into a slow-motion collapse. The names may change, but the danger of relying too heavily on a narrow slice of the market remains the same today.
Bad Luck Betty: 1973–1984
Broke in 11 Years
Enter Bad Luck Betty. We'll assume she retired with the $2.4 million our prior employee saved diligently to buid up. She began withdrawing $12,000 per month to support her retirement. For illustrative purposes, I’m using historical market data but it is expressed in today’s dollars. The data is drawn from the past, but I'm using it to simulate a forward-looking outcome, helping us see how different market environments might impact a retiree like Betty in today's dollars.
Unfortunately, as shown in Figure 1.0, Betty faced steep market losses early in retirement. To make matters worse, her income needs which continued despite the market downturn locked in losses, leaving her portfolio unable to fully recover. Although the market eventually rebounded, the damage was already done—it was too late for Betty’s portfolio to catch up.
This is called sequence risk—and it can be devastating. Despite strong market returns in the later years, Betty ran out of money just 11 short years after she retired. Imagine how she lived her later retirement years, probably leaning on her kids when her car broke down or when she needed a little extra money to get by until her Social Security check arrived. I doubt it was the retirement she imagined after decades of hard work and smart saving.
Yet this is exactly why retiring with a growth strategy when you need income is a gamble. If the market goes your way, it can work. But if it doesn’t, you may not have time to recover. When you're no longer contributing and have shifted from accumulation to distribution, your investment approach has to reflect that change. Otherwise, you risk turning a solid retirement plan into a short-lived one.
However, sometimes, bets do pay off.
Lucky Larry: 1982-2012
A Growth Strategy That Actually Worked
Meet Lucky Larry who steps into retirement in 1982, just as the market takes off. Like Betty, he finishes his career with a $2.4 million portfolio, fully invested in the S&P 500. Keep in mind that this is for illustrative purposes only and past performance is not a guarantee of future results. In fact, that is the point. Since past performance is not indicative of the future, luck has far more to do with retirement success, as you will see. None of us can afford to be on the wrong side of that luck.
But in this case, Larry did quite well. Like Betty, he kept his strategy the same – 100% S&P 500 index allocation - and despite taking a steady income from his portfolio, Larry experienced an incredible tailwind: the market soared during his early retirement years. The S&P 500 gained over 14% the first year of his retirement, followed by a 17.5% gain in 1983, and his balance just continues climbing as you can see in the chart below.
Within a few short years, even with regular withdrawals, his account balance not only holds up—it grows. That’s a good thing, too, because inflation also surged during this period. Still, this is a powerful illustration of how favorable early market gains can be in retirement. If you go into retirement with a growth strategy and get lucky, it can work out very well. But let’s be clear—it wasn’t the strategy that was perfect. It was the luck of the draw. The timing happened to work in his favor.
Larry lived a long, happy retirement to age 95. He generated over $7 million in income over his 30-year retirement. He enjoyed travel, was able to splurge when he wanted and he could even help his kids financially when they needed it. Larry passed away in 2012 with $8.8 million remaining for his beneficiaries.
For Larry, managing retirement was easy. He kept the same investment allocation – one S&P 500 index fund – throughout his entire retirement, and even though he lost millions in the dot com bust and financial crisis, he remained steadfast and continued to enjoy a rising income that supported all his needs and more.
(By the way, although when you look at his yearly income you might think that’s excessive, but remember we’re indexing for inflation. So in today’s dollars his income ranged from $150,000 to $200,000 a year. Comfortable, yes—but not nearly as extravagant as it might appear. That’s called inflation and you, too, will need a rising income in retirement).
Brian the Better: 1999-2008
Retired Rich, Died Broke
Now let’s meet Brian. Brian thought he had cracked the code. From 1995 to 1999, he turned $200,000 into $1.4 million by investing in the Nasdaq. The dot-com boom made him feel like a genius, and he wasn't alone—those years were filled with overconfident investors who believed tech was the future and risk no longer applied. I remember meeting so many people like Brian. One man retired with 100% of his $2 million retirement savings in Enron stock. He was 67 years old and the year was 2001. He thought it was a solid company – after all, he spent the last ten years of his career working there and they helped him build up an incredible sum through their stock program. He didn’t want to take my advice, though. He stayed with his strategy and unfortunately a year later, he lost everything.
Hindsight is always 20/20, but during a bull market, even the smartest investors can abandon sound principles. It’s a well-documented behavioral finance reality.
Back to Brian. By 1999, he had $2.4 million - the same as Larry and Betty and like them, he retired with full confidence. He kept everything in the Nasdaq because, as he put it, “tech is never going to die.” He started withdrawing $12,000 a month to fund his retirement, just like Larry and Betty and he didn’t think twice about his investment allocation. After all, the last five years had been a rocket ship.
Then the bubble burst.
In 2000, the Nasdaq dropped nearly 39%, followed with -22% in 2001 and another -32.5% in 2002. Brian’s portfolio, once flush with $2.4 million, fell below $500,000 within just three years. He held out hope that it would rebound, thinking this would be the best place to benefit from a big gains but the losses outpaced any chance of recovery. He was down to zero just eight years into retirement.
This is not an exaggeration—it’s what could happen if you retire with a high-growth portfolio and assume the good times will last forever. Sequence risk doesn’t care how smart you felt during the bull market. If you don’t adjust your strategy for retirement, you are not investing. You are gambling.
Now you may be thinking, well I would just sell out and stop the losses. That may feel like taking control, but in retirement, that reaction can also be devastating. The psychological relief of “getting out” is short-lived—what follows is fear, hesitation, and paralysis. You’re sitting in cash, afraid to re-enter, while your need for income and recovery doesn’t stop. Every month that passes, inflation quietly chips away at the value of what’s left. Without a recovery strategy, your portfolio isn’t just stalled—it could be set for deterioration. That’s not damage control. That’s financial erosion dressed up as safety.
So What’s the Right Strategy?
These stories aren’t just hypotheticals—they reflect the real impact of timing, allocation, and mindset. So how do you make sure your retirement story ends well?
The best retirement strategy isn’t a magic product or a one-size-fits-all rule. It’s an income strategy designed specifically for you. That means aligning your portfolio to your real-world income needs, your risk tolerance, and your life goals. It’s about shifting the focus from chasing growth to generating sustainable income, protecting against downside risk, and still allowing for prudent growth along the way.
The right strategy uses the capital markets to serve you—not the other way around. That means diversification across asset classes, a thoughtful allocation between income and growth, and the flexibility to adapt when life or the economy changes. The markets are not static, nor should your investment strategy in retirement. It’s no longer about averages. Your portfolio needs to be dynamic, personal, and deliberately planned to support your retirement.
Heading into retirement with the wrong strategy can cost you. Heading in with the right one can give you freedom, stability, and confidence. The growth phase is over. Now it’s time to make your money work for you.
Retirement Requires a Different Playbook
I’ve been helping clients navigate retirement for nearly forty years and maybe I’m biased, but after seeing what works and what doesn’t, I can tell you this: no one is going to convince me that entering retirement with a growth strategy is sensible. Nor do I believe in any “set it and forget it” approach once you stop working. There is no Target Date Fund or single investment that will likely be smart enough to support a 30 year retirement.
A Strategy That Worked
Let’s take a look at how a more balanced, all-weather portfolio might have performed through a challenging market cycle. The illustration below reflects the actual performance of a real-world, diversified portfolio designed to provide both growth and income over time. We’re not disclosing the specific composition because this isn’t about promoting a product—it’s about showing the power of thoughtful construction and disciplined, professional management.
This isn’t a prediction or a promise, but it does highlight what can happen when a portfolio is managed with intention—aligned with your retirement goals instead of reacting to headlines.
Meet Strategic Sandy: Retired in 1973
Supported a 30 Year Retirement
Sandy didn’t try to outguess the market. She hired a professional team to help her navigate market risk and support her long-term income needs. Her retirement portfolio was managed dynamically—proactively adjusted based on evolving market conditions and her unique objectives.
She retired at the same time as Betty, but because her approach was entirely different, so, too, was her outcome. Notice she still experienced market declients early in retirement and she still took the same somewhat lofty withdrawals. The difference? She had an active management team who incorporated tactical shifts, hedging strategies, and conducted ongoing rebalancing. She followed a personalized approach designed to help preserve purchasing power and strive to provide steady income across market environments. And it worked.
Sandy lived a long life and enjoyed over $7 million in income over her 30-year retirement. She also left a legacy of $4.5 million for her heirs. She had a lot less volatilty than Lucky Larry and yet she endured some of the most difficult periods in the market, including the 1973-74 era as well as the dot com bust. She relied on strategy instead of luck to support her retirement.
That’s the power of a portfolio designed to weather storms and support real retirement goals, not just chase returns.
It’s not magic. It’s called prudent management.
If you’re within five years of retirement, or already there, and you’re not sure whether your current investment strategy is still serving you, let’s talk. We’ll help you rethink what retirement income should look like—on your terms, built around your life.
Whatever you do, remember, you only get one retirement. Make sure your strategy is aimed to work for you—not against you.
The case studies and retirement examples provided are hypothetical and intended to illustrate the concept of sequence of returns risk and the importance of aligning investment strategy with retirement income needs. These examples do not represent actual clients and are not guaranteed to reflect future outcomes.