Professional athletes often say that deciding when to hang’em up is one of the most difficult career choices they have to make.
For the record, financial advisors tell their clients who are considering retirement the very same thing. And they aren’t even playing games in front of packed stadiums or sold-out arenas.
When it comes to thinking about timing or sequence risk before locking in a retirement date, Mallon FitzPatrick, head of wealth planning at Robertson Stephens, tells clients to think of their retirement dates not just as a lifestyle choice, but as a risk variable to evaluate. To prove his point, he points to new research from Kitces.com which says three out of four retirement outcomes are driven not by how well one has saved, but by the market environment one retires into. Put simply, the years just before and after retirement are when one's portfolio is at its largest, and therefore the most exposed.
“A significant market decline early in retirement does damage that may be difficult to undo, because you are withdrawing funds at the worst possible time. The research found that simply having flexibility around your retirement date, even a two-year window, could produce a difference of roughly two-thirds in final portfolio value depending on when within that window you actually retire,” FitzPatrick said.
Rather than planning only against an average expected return, he recommends running retirement projections through a bear market in years one through five, a prolonged period of elevated inflation in early retirement, or a combination of both.
“Seeing these scenarios side by side often changes the conversation. The question is no longer ‘can I retire?’ but ‘how resilient is my plan if conditions are unfavorable early on?’” FitzPatrick said.
Similarly, Stephanie Shields, wealth advisor at Thrivent, believes a key focus for pre-retirees should be “stress‑testing their plans” around spending assumptions, income durability and inflation sensitivity. In her experience, many clients either underestimate what they’ll spend in retirement or haven’t pressure‑tested how flexible those expenses truly are if markets or prices move against them.
“Advisors should walk clients through scenarios that model higher‑than‑expected inflation, lower early‑retirement returns and longer lifespans and health outcomes, while also evaluating how much of their income is guaranteed versus market‑dependent,” Shields said.
Shields adds that she likes to ensure clients’ essential expenses can be covered by reliable income sources, while growth‑oriented assets remain positioned for long‑term needs.
“Stress‑testing now, before a retirement date is locked in, gives clients time to adjust factors like savings rates and retirement timing in a more controlled way, rather than being forced into reactive decisions once it’s too late,” Shields said.
Troy Davidson, wealth advisor at Ballast Rock Private Wealth, agrees that retirement timing can be one of the most “consequential and underappreciated” decisions a potential retiree can make. And given the current environment — elevated oil prices from the Iran conflict, a higher-for-longer Fed posture, and geopolitical uncertainty — he believes pre-retirees within five years of their target date should be stress-testing withdrawal rate sensitivity, portfolio concentration and tax drag on withdrawals.
“Pre-tax accounts withdrawing into a volatile market at forced rates can compound the sequence risk problem. This is the moment to evaluate Roth conversions, tax-loss harvesting, and drawdown sequencing across different account types,” Davidson said.
Finally, Kenneth Couser, vice president and director of financial planning at Janney Montgomery Scott, said one of the most effective tools to protect from market declines early in retirement and into retirement is a cash bucket strategy. Holding 1 to 3 years of spending in cash or short-term bonds provides liquidity and allows retirees avoid selling investments at a loss if market drops early in retirement.
“A well-built plan does not eliminate sequence risk, it manages it. The goal should not be to predict the markets but create enough flexibility to avoid locking in losses at the worst possible time,” Couser said.
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