How Smart Retirees Prepare for Market Chaos

When markets get rocky, I often hear the same concern from people who are retired or about to retire:

“How will this affect the rest of my life?”

It’s an honest—and important—question. Because at this stage of life, the stakes are high. You’re no longer focused on building your wealth, you’re focused on protecting it and making it last.

But what if you didn’t have to guess?

What if, instead of worrying about whether or not you should make changes to your investments when markets drop, you had a clear roadmap showing exactly how your lifestyle might be impacted—and by how much?

That’s where a risk-based guardrail strategy comes in.

This doesn’t replace a long-term financial plan—but it’s a powerful tool we use to help remove the anxiety retirees often feel during turbulent markets.

What Are Risk-Based Guardrails?

Think of them as dynamic spending boundaries. Rather than relying on outdated rules like the “4% rule” (which was originally introduced by William Bengen decades ago and never meant for real-world use), guardrails use modern planning technology to tell you:

• • How much income you can safely withdraw today
  • When you’d need to make a spending cut (and by how much) if markets fall
  • And (in good years) when you can afford to spend more

It brings clarity to questions like:

“What if the market drops 20%—will I be okay?”
“When would I actually need to adjust?”
“How bad would it have to get before I change my lifestyle?”

Meet Mike and Linda

Let’s say Mike and Linda are both 65 and have a $2 million portfolio—split evenly between taxable brokerage accounts and IRAs.

With a moderate spending approach, their guardrails suggest they can withdraw $9,560/month from their portfolio.

• • • If their portfolio grows to $2.77 million, they could increase that to $13,200/month.
    • But if it drops by about 33% to $1.339 million, they’d need to cut spending by just 5%—or about $480/month

When you view things through this lens, a market downturn becomes far less scary.
Instead of focusing on what you can’t control (the markets), you focus on what you can—your spending. And for most retirees, a 5% spending cut is very manageable.

That said, it’s important to acknowledge that if the market continues to decline beyond that threshold—or takes a long time to recover—additional spending cuts could be required.

This is why we help clients define ahead of time:

• • • How much they could realistically cut if needed
    • How long they’d be comfortable with a reduced spending level
    • How flexible they want their guardrail thresholds to be

Planning for these contingencies—before they happen—helps clients feel more prepared and in control.

Prefer Fewer Adjustments?

Now let’s consider John and Susan. Same age, same $2 million portfolio. But they’re more risk-averse. They really don’t want to make changes to their lifestyle if markets drop.

We can build that in. In their case, we start them with a lower income of $7,760/month.

• • • But now, their lower guardrail is $1.1 million—meaning their accounts would need to fall 45% before they’d have to make any cuts.
    • Even then, it’s still just a 5% spending cut—about $390/month.

Different strokes for different folks. One strategy isn’t better than the other. It just depends on your comfort level with spending adjustments and how flexible you want your plan to be.

The Point Is: You Have Options.

Risk-based guardrails give you a way to live confidently and flexibly throughout retirement:

 Reduce the risk of running out of money
 Make smarter adjustments only when necessary
 Know what to do when markets rise or fall
 Potentially increase income over time
 Replace worry with control

It’s also important to remember that these numbers are based on many investment assumptions—including portfolio mix, tax treatment, inflation, longevity, and withdrawal order. The results can vary widely depending on your personal situation, so we don’t recommend trying to build this type of plan on your own. 

Bottom Line:

If you’re retired (or thinking about retiring soon), and you’d like to stop worrying about the next market drop, let’s talk. You can schedule a 15-minute introductory call with me by clicking here.

We’ll help you build a dynamic retirement plan that’s designed to adapt over time—giving you peace of mind no matter what the market is doing.

Best,

Zack Swad, CFP®, CWS®, RLP®, BFA™, AWMA®, AAMS®
President & Wealth Manager, Swad Wealth Management, LLC
Tel: 707-899-1010 | Fax: 707-324-6769
www.swadwealth.com
100 Stony Point Rd, Suite 244, Santa Rosa, CA 95401

Swad Wealth Management, LLC is an Investment Advisor registered with the State of California. All views, expressions, and opinions included in this communication are subject to change.

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