Being too conservative in retirement is just as dangerous as being too aggressive.

Retirement Is a New Concept

Retirement as we know it is a relatively recent invention. For most of human history people worked until they physically could not anymore.

When Social Security was signed into law in 1935 the average life expectancy for men was 59.9 years and for women 63.9 years. Full benefits did not kick in until age 65. The retirement age was set above the average life expectancy. The program was designed for a world where most people would not collect for very long.

Today life expectancy is around 79 years and many people are living well into their 80s and even 90s. That is a very different world from when Social Security was invented and it was never designed for the world we are now in.

The Math of a Long Retirement

Let's say you retire at 63. You could easily live another 30 years. In some cases 35 or even 40. That means you might spend more years in retirement than you spent working.

The purchasing power of that money will erode year after year until what felt like a comfortable nest egg at 63 feels very different at 83. Inflation does not stop because you retired. Healthcare costs certainly do not. Property taxes do not.

The Real Risk of Playing It Too Safe

A portfolio that is not growing is quietly losing ground to inflation every single year. At 2% annual inflation your purchasing power cuts in half over 35 years. At 3% it happens even faster. The money is there in the account but it buys less and less of the life you want to live.

This is longevity risk. The risk of outliving your money. And for most teachers it is a far more likely scenario than a catastrophic market crash wiping them out.

The Balance We Strike

The right answer depends entirely on your specific situation, your pension income, your expenses, your health, your goals, and how long you realistically need your money to last.

For most of our clients the pension provides a stable income floor that changes the risk calculus significantly. Because your basic needs are covered by a guaranteed source your investment portfolio does not need to be built around survival. It can afford to grow. It should afford to grow.

The bucket strategy we use gives you the security of a conservative portfolio and the growth potential you actually need to make a 30 year retirement work. You worked too hard and too long to run out of money at 85. We plan accordingly. Longevity risk and sequence of return risk work together, and both feed directly into a full retirement income plan →.