Aaron Cirksena is the founder and CEO of MDRN Capital.
Every week, I talk to potential clients who are nearing retirement age and deeply concerned about the value of their investments. Many of them set up a traditional 80/20 or 60/40 retirement portfolio years ago, with a mix of 60% to 80% stocks and 20% to 40% bonds, and haven’t touched them since.
And for decade after decade, buy and hold was a solid long-term investment strategy. You could manage your risk by adjusting the balance of stocks and bonds in your portfolio—for example, opting for a 55% stocks and 45% bonds blend when the stock market was more volatile. Bonds were a reliable “safe” asset class that allowed you to lock in high interest rates. In 1981, the yield on a 30-year Treasury bond exceeded 15%. In 2025, that number has been hovering around 5%. The Fed lowered the federal funds rate three times in 2024. This borrowing rate has remained in the 4.25% to 4.5% range since December, and it could stay there or drop more later in the year.
But any way you slice it, we are in a low-interest rate environment that is extremely dangerous for bond portfolios. From a capital appreciation standpoint, every time you buy a new bond while interest rates decline, you take on more risk and receive a lower yield. The worst part is, you might not even realize that your portfolio is in danger of losing value. Once you factor in a 1% advisory fee and a 2% to 3% inflation rate, a bond portfolio with a 4% to 5% expectation of return is likely to have a flat or negative yield. The juice is simply not worth the squeeze with interest rates as low as they are—especially for a pre-retiree who is about to start withdrawing money from their portfolio.
Navigating The Pre-Retirement Danger Zone
The riskiest time for your portfolio is the five years leading up to retirement and the first five years into retirement. You need to make sure that you have enough safe money in your portfolio that is protected against market fluctuations or interest rate changes.
If you retire at 65, and the market takes a big dive five years before or after your retirement—right when you are starting to withdraw from your portfolio—you face a higher sequence of returns risk that can keep compounding. In other words, the timing of withdrawals and poor investment returns can negatively affect your overall rate of return and retirement savings lifespan.
You might think you are being cautious enough by leaving a certain percentage of your portfolio untouched, but if you have 20 or 30 more years of retirement, you could be doing irreparable damage. When the market does eventually recover, you will have sold investments at a loss and have less money to benefit from the rebound.
My team and I encourage our clients to avoid these pitfalls by ensuring that they have 15 to 20 years of protected income to get them through any market downturns in their first years of retirement. The historical data is clear: The market will recover and deliver solid returns over a long period of time. But you need a plan to create a protected income bucket so you can weather any early storms you encounter.
Balancing Liquidity And Return Expectations
To help clients understand the potential risks and rewards of their investment options, I walk them through two potential plans. Both build principal-protected income but have slightly different levels of liquidity and return expectations:
Option A
• 2-4% annual return.
• 100% liquidity, fully accessible at all times.
• The amount of protected income will be higher, and return expectations will be lower.
• Examples: cash, CDs, money market accounts, high-yield savings accounts.
Option B
• 5-8% annual return.
• 10% access to funds for the first 10 years of retirement, then full access.
• The amount of protected income will be lower, and return expectations will be higher.
• Examples: fixed annuities and fixed index annuities.
Both are good plans. It doesn’t really matter what people choose, as long as they figure out which plan is the best fit for their goals. Option A is fully liquid and accessible from the beginning, but it offers lower return potential, likely yielding around 2% to 4% long term. Option B has lower liquidity for the first decade, but it enables you to lock in better rates over a longer period of time, for example, ranging between 5% to 10% over five to 10 years.
If the market goes down, the worst-case scenario for either of these plans is receiving no return for a year and withdrawing from your portfolio. There is no way to lose value from your portfolio the way you could with a bond portfolio. In 2022, the worst year to date for bonds, you could have watched your portfolio drop 15%, then still have to pay a 1% advisory fee and make a withdrawal.
Our current low-interest environment has changed conventional wisdom about retirement investing. A traditional buy-and-hold strategy for a portfolio with a heavy bond allocation is no longer a safe bet. You need a proactive, structured approach to retirement planning that guarantees your income during your most vulnerable years.
The information provided here is not investment, tax, or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
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