The first decade after you stop working is unusually important. A market decline in year two forces withdrawals from a damaged portfolio. The same decline in year twenty may be irritating but survivable. Average return is identical; outcome is not.
Why the tent exists
A bond tent raises the share of safer assets near the retirement date, then gradually lowers it as the dangerous early years pass. Think of canvas stretched over the sequence-risk zone. It is temporary by design.
The tent does not guarantee success. Bonds can fall. Inflation can erode them. A plan with excessive spending cannot be rescued by elegant allocation. The purpose is narrower: reduce the chance that a severe early equity decline forces you to sell too much stock at bad prices.
How to size it
Translate percentages into years of essential withdrawals. If two years of core spending is $90,000, ask whether the safer side of the portfolio can cover that amount after accounting for dividends and other income. “Forty percent bonds” is abstract. “Two bad years without selling stocks” is a decision you can feel.
Separate essential spending from optional travel, gifts, and upgrades. Flexibility is an asset too. A household willing to cut discretionary spending by 20% after a crash needs a smaller tent than one whose budget is entirely fixed.
The hidden cost
Safety assets reduce upside. Build too large a tent and longevity risk grows. Hold it forever and the temporary insurance becomes a permanent drag. That is why the glide path—the planned movement out of the tent—belongs in writing before the market becomes frightening.
Read the site’s short explanation of sequence-of-returns risk and its critique of retirement calculators. The right tent is not the one that backtests best. It is the smallest one that lets you follow the plan through a genuinely ugly opening decade.
Leave a Reply