Order beats average
Two retirees with identical average returns can finish bankrupt and wealthy. When the bad years arrive is what separates them.
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Retirement & Estate
Accumulation is the easy half. Turning a portfolio into a reliable paycheque involves irreversible decisions made under uncertainty: when to claim Social Security, which Medicare parts to enrol in and when, how fast to convert tax-deferred money, and what order to spend from. Get the sequencing right and the same portfolio lasts materially longer.
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The decumulation decisions, in order
Several of these are one-way doors. Sequence matters because each choice narrows the options available to the next.
- Protect against sequence riskThe first five years of withdrawals determine whether the portfolio survives. Build the buffer before you need it, not during a drawdown.
- Decide the claiming ageSocial Security is inflation-adjusted longevity insurance. Delaying raises the cheque by roughly 8% a year — and permanently raises the survivor benefit.
- Use the gap yearsBetween retiring and claiming, taxable income collapses. That window is the cheapest opportunity you will get to convert tax-deferred balances.
- Enrol in Medicare on timeThe Part B late-enrollment penalty is permanent, and IRMAA surcharges look back two years — so conversions and enrollment interact.
- Fix the paperworkBeneficiary designations override your will. This is the cheapest, most-neglected task on the entire list.
Longevity is the real risk
Running out of money at 92 is worse than earning slightly less at 70. Insure the tail rather than optimising the median.
Most estate failures are clerical
Stale beneficiary forms, unfunded trusts and accounts nobody can find cause more damage than genuine legal disputes.
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