top of page
  • Writer's pictureNoel Watson

Retirement planning concepts that sound good in theory


We've examined many retirement planning concepts/strategies and discovered that once subjected to scrutiny, many don't seem to offer the claimed benefits.

This article gives an overview of our findings.

Sequence of returns risk

  1. Holding cash. We found that the cash buffer didn't work when you really needed it to - during a protracted multi-year drawdown.

  2. A bucket approach: We haven't written about the bucketing strategy yet, but Michael Kitces summarised it as well as we ever could, finding that "rebalancing alone already has an astonishingly powerful effect to help avoid unfavourable liquidations".

  3. Natural income. While the natural income approach may mitigate SORR, it often comes with the potential downside of having to accept too much volatility, both in terms of retirement income and underlying portfolio valuations. Furthermore, retirees cannot easily adjust their income to align with their changing retirement expenditures.

  4. Smoothed funds share some of the challenges of the natural income and cash buffer approach. There is not enough data readily available to determine how smoothed funds would have performed during really challenging periods. For the data we do have, the worse the market volatility, the worse the smoothed fund performed relative to our "No Brainer" portfolio.

Portfolio structure

  1. Replacing bonds with (level) annuities in the retirement portfolio: We found that during challenging periods, which often occurred during inflationary times, replacing the bond portion with annuities led to worse worst-case outcomes.

  2. 100% equity portfolios in retirement. Given that equities tend to outperform bonds over the long term, holding a 100% equity portfolio in retirement might seem the obvious choice, but we found that it tended to generate worst-case outcomes inferior to those of a portfolio containing some bonds. Furthermore, we questioned whether all clients holding a 100% equity portfolio would be happy holding it during prolonged downturns, such as the 2000-2010 lost decade.

Withdrawal strategies

  1. The 4% rule was never an actual rule, and we identified fifteen challenges that retirees should be aware of.

  2. Guyton guardrails are often portrayed as fixing the numerous issues with the 4% "rule", but this approach has downsides, which makes us question whether it should be treated more as an academic concept rather than used for real-world retirement planning.

Investor behaviour

  1. The S&P 500 lost decade was an example of why retirees should avoid putting all of their eggs in one basket and not "invest in what is working now".


The above articles highlight the importance of:

  1. Doing your own research and ignoring conventional wisdom.

  2. Research history (the more, the better) and evaluate how various options fared.

Want to find out more?

If you would like help building a robust retirement portfolio based on proven strategies, please contact us.

About us

The team at Pyrford Financial Planning are highly qualified Independent Financial Advisers based in Weybridge, Surrey. We specialise in retirement planning and provide financial advice on pensions, investments, and inheritance tax.

Our office telephone number is 01932 645150.

Our office address is No 5, The Heights, Weybridge KT13 0NY.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

110 views0 comments



bottom of page