Why Relying on Investments Alone Could Put Your Retirement at Risk
When planning for retirement, one of the most common strategies people hear is to simply draw down a percentage of their investments—typically 4% to 5% each year—and hope that the market continues to perform well enough to sustain their income. This method has worked for some, but we’ve also seen far too many retirees run into serious trouble following this advice alone.
As retirement advisors who specialize in retirement income planning, we want to share with you a more precise and more stable alternative: guaranteed income.
Investments vs. Guaranteed Income: The Big Picture
Here’s the issue: the market doesn’t always cooperate with our retirement timeline. Suppose you’re taking money out of your investments during a market downturn. In that case, you could be locking in losses that your portfolio might never recover from. This pitfall is known as sequence-of-returns risk, and it’s one of the most dangerous and overlooked threats in retirement planning.
On the other hand, guaranteed income sources—like pensions, annuities, or hybrid pension solutions—can give you a consistent paycheck no matter what the market is doing. These products are not dependent on stock performance. They can offer the kind of income stability that allows you to enjoy retirement without constantly checking the S&P 500.
The Susan and Joe Example
To illustrate this, let us share a familiar story we see: Susan and Joe both retire at 65 with the same $500,000 portfolio. They each withdraw 4% per year, adjusted for inflation. Susan enjoys favorable market returns early in retirement and ends up with over $1.7 million by age 85. Joe, on the other hand, experiences poor returns in his early years and ends up with less than $400,000, even though the average return over time was the same for both.
Why the vast difference? Joe had to withdraw from a shrinking portfolio, compounding his losses. He simply got unlucky with the timing.
This outcome is not something anyone can predict—and it’s precisely why guaranteeing part of your income can be such a powerful strategy.
When You Might Be Forced to Withdraw
Many retirees believe they can “ride out” market downturns. But the reality is, you might not have that choice. Here are a few examples when people are forced to withdraw money, regardless of market conditions:
- Full retirement – You still have bills to pay and need consistent income.
- Required Minimum Distributions (RMDs) – The IRS mandates these withdrawals starting at a certain age.
- Health or long-term care costs – These are unpredictable and can’t be postponed.
When these situations arise during a recession, withdrawing from investments can do lasting damage. That’s why we encourage clients to set up guaranteed income sources ahead of time—so when these moments come, your lifestyle doesn’t have to change.
The Value of Pensions and Hybrid Income
Retirees who have traditional pensions—like teachers or government workers—typically aren’t worried about market crashes affecting their monthly checks. That’s because their income is guaranteed in writing. Even if they have a 401(k) or IRA, that pension acts like a strong foundation.
Now, not everyone has a pension, but we can create something similar using a hybrid annuity, also known as a hybrid pension. These are insurance-backed products designed to provide:
- Lifetime income guarantees
- Protection of principal
- Control over your remaining assets
- No or low fees (depending on the plan)
We’ve used these tools in our own retirement planning and for countless clients. They allow people to breathe easier and live the retirement they envisioned, without making daily decisions about which fund to draw from or when to move to cash.
It’s Not Either/Or—It’s About Balance
We’re not saying to get rid of your investments. We believe a well-diversified investment portfolio plays an essential role in long-term growth. But investments should not be the sole provider of your retirement income.
Instead, let’s build your retirement plan like a house:
- Investments are the roof, designed for growth.
- Guaranteed income is the foundation, keeping everything stable when storms hit.
By combining both, you can create a plan that offers growth, flexibility, and peace of mind.
Final Thought: Do You Want Your Income Guaranteed in Writing?
Here’s the question we always ask clients: Do you want your retirement lifestyle guaranteed—in writing? If the answer is yes, then let’s talk about how guaranteed retirement income can be part of your plan. It’s not about taking away control. It’s about giving you options, reducing stress, and protecting what you’ve worked so hard to build.
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