The pre-retiree journey—the last decade before retirement—has traditionally been defined by moving from accumulation to preservation. Today, that approach is becoming obsolete.
The elevated interest rate environment has introduced tension between perceived safety and true long-term security. While seeing high yields on CDs and bonds is comforting, this apparent stability is deceptive. It introduces second-order risks that fundamentally redefine what having “enough” means in retirement today.
The good news is that we have a framework to address the complex impacts of this new economic reality.
Redefining Risk: The Sequence-of-Returns Threat
For pre-retirees, we need to be mindful of the sequence-of-returns risk, which occurs when market downturns happen in the first few years of withdrawal.
High yields mask this threat. Market anxiety often drives individuals to retreat into cash or short-term fixed income. This is dangerous because cash provides limited growth and is quickly eroded by inflation. By concentrating capital in these safe, low-growth assets, you leave the rest of your portfolio heavily exposed. If a market correction hits, you are forced to take withdrawals from a shrinking, vulnerable pool, which significantly depletes your capital's ability to last for the long term.
The Takeaway
Wealth for retirement needs growth for longevity. The priority is structuring the portfolio to weather the first five years of retirement withdrawals without being forced to sell equities at a loss during a downturn.
Redefining Income: The Evolving Role of Fixed Assets
The low-rate era forced investors into riskier assets just to earn yield. Today, fixed income is back, but its role has changed entirely.
The traditional 60/40 portfolio relied on bonds as an unconditional hedge against equity risk. Now, bonds are competitive income generators, forcing a strategic review of how income floors are built. We recognize that investment-grade credit offers strong income streams. To maximize the longevity of a portfolio, we must decide how much risk to take further down the credit spectrum.
The Takeaway
The focus must shift from simply accumulating capital to actively structuring a durable income stream—a critical step that research identifies as a key barrier to confidence.
Redefining Efficiency: The Tax & Inflation Traps
High rates create new complexity in the form of tax and purchasing power traps.
High current yields translate directly into higher taxable income. The interest you are enjoying in a non-qualified account may be significantly eroded by your tax bracket, making the net return far less attractive. This makes asset location—deciding where in your tax-advantaged and taxable accounts to hold specific assets—a crucial, sophisticated year-end action.
The Takeaway
While current yields help, inflation remains the chief confidence-killer. Financial progress requires protecting future purchasing power over three decades. Non-correlated assets are essential to maintain purchasing power against inflation.
A Forward-Thinking Framework
The modern retirement reality requires a dynamic, structured approach. Here are a few final tips to consider:
The transition to retirement is complex and requires strategic discipline. Measured Wealth helps pre-retirees translate market complexity into a clear, actionable financial strategy, with the intention that your portfolio will be structured to achieve your long-term legacy.
Interested in being supported in your financial journey? Connect with Measured Wealth today to review your wealth strategically and thoroughly to understand your future.