Why the 10 Years Around Retirement Can Permanently Change Your Financial Future

For many retirees, the greatest fear is not dying early. It is running out of money while they are still alive. What surprises many people is that retirement success is often determined less by long-term average returns and more by when those returns happen.

Two retirees can save the same amount, invest the same way, and even earn similar long-term market returns — yet one may experience financial confidence while the other spends retirement worried about running out of money. The difference is often not how much they earned. It is when the market declined.

A retiree who experiences a major market decline just before or just after retirement can face dramatically different outcomes than someone who retires during strong market conditions — even if both investors earn similar average returns over time.

Researchers David Blanchett, Michael Finke, and Wade Pfau recently described this period as the Retirement Risk Zone, often referred to as the Fragile Decade — the roughly 10-year period surrounding retirement where market declines can have an outsized and permanent impact on retirement income planning.

Their findings are important because they challenge one of the most common assumptions investors make: “If I just stay invested long enough, everything will work out.”

For retirees approaching retirement, timing matters. A lot.

What Is the Fragile Decade?

The Fragile Decade is the five years before retirement and the five years after retirement. Researchers often refer to this period as the Retirement Risk Zone because market declines during this time can dramatically impact retirement income, portfolio sustainability, and long-term lifestyle flexibility.

According to Blanchett, Finke, and Pfau: “Portfolio returns during these years are the most important when determining the amount of spending a retiree can generate from savings.”

Their research found something even more surprising: “Returns experienced immediately before retirement are even more important than those experienced during retirement.”

That statement changes the way many people should think about retirement planning.

For most of someone’s working career, market volatility is uncomfortable but manageable. When investors are young, they still have decades of earnings ahead of them. They are continuously contributing new money into retirement accounts. Market declines early in life may actually help long-term savers by allowing them to buy investments at lower prices.

But retirement changes everything.

The closer someone gets to retirement, the larger their account balances tend to become. At the same time, the number of remaining working years becomes smaller. This creates a dangerous imbalance:

• The portfolio is now large enough that market declines can erase years of savings very quickly.
• There may not be enough remaining working years to recover.
• Retirement withdrawals may soon begin, forcing the investor to sell investments while prices are depressed.
• Market declines during this period can permanently reduce future retirement income.

This is what sequence of returns risk looks like in real life.

Why the Fragile Decade Is So Dangerous

The danger of the Fragile Decade is not simply that markets decline. Markets have always gone through corrections, recessions, and bear markets. The real danger is when those declines occur at the exact moment someone is transitioning from building wealth to depending on that wealth for income.

The greatest risk is not simply poor market returns. It is poor market returns at the wrong time.

A market correction at age 35 may feel painful emotionally, but it rarely destroys a retirement plan because younger investors still have decades of earnings ahead of them, ongoing retirement contributions, and time for markets to recover. A market decline at age 64, however, can permanently alter someone’s retirement lifestyle because the portfolio is now expected to begin replacing a paycheck.

Why Timing Matters So Much Near Retirement

• Your retirement portfolio balance is often at its highest level right before retirement.
• You have fewer working years remaining to recover from losses.
• Retirement withdrawals may soon begin.
• Large losses can permanently reduce retirement income.
• Emotional investment decisions become more dangerous during this phase.

Blanchett, Finke, and Wade Pfau highlighted this risk with a simple but powerful example. Imagine one retiree who enters retirement with a $1 million portfolio and follows a 4% withdrawal strategy, allowing them to generate approximately $40,000 of annual retirement income from investments. That retiree successfully begins retirement with the income level they originally planned for.

Now consider a second retiree with the same $1 million portfolio and the same retirement goals, but whose portfolio experiences a significant market decline immediately before retirement. If the portfolio falls to $840,000, a 4% withdrawal rate would now support only about $33,600 of annual income instead of $40,000.

A 16% market decline reduced sustainable retirement income from $40,000 to $33,600 per year before retirement even began.

That difference may not seem dramatic at first glance, but it represents a permanent reduction in retirement income caused solely by unfortunate market timing. The retiree did not save less, spend irresponsibly, or fail to plan. The difference came from experiencing a market decline during one of the most financially vulnerable periods of life.

The challenge becomes even greater after retirement begins because withdrawals create a compounding effect during down markets. When portfolio values decline while retirement withdrawals continue, retirees are forced to sell more shares at lower prices in order to maintain income needs. Those shares are then permanently gone and can no longer participate in the eventual market recovery.

What Happens During Negative Sequence of Returns Risk

• Portfolio values decline.
• Retirement withdrawals continue.
• More shares must be sold while prices are down.
• Fewer shares remain available for the recovery.
• The retirement portfolio may never fully recover its long-term trajectory.

This is the core of negative sequence of returns risk.

Two retirees may experience nearly identical average market returns over a 25- or 30-year retirement, yet have dramatically different outcomes simply because one experienced poor returns early while the other experienced those same declines much later. Early losses combined with ongoing withdrawals can place permanent strain on a retirement portfolio in ways that later declines often do not.

Average returns matter far less than the sequence in which those returns occur.

That is why retirement income planning cannot rely solely on long-term average returns. The sequence in which returns occur matters tremendously during the years surrounding retirement.

Who Is Most Exposed to the Fragile Decade?

The Retirement Risk Zone is especially important for:

• Investors within 5 years of retirement
• Recently retired households
• Retirees taking withdrawals from investment accounts
• Investors heavily exposed to stock market volatility
• Households relying primarily on 401(k) or IRA assets
• Retirees delaying Social Security benefits
• Households without pension income

Investors who have not updated their retirement asset allocation in years

For many retirees, this period represents the first time their portfolio must begin functioning like a paycheck rather than simply a growth account.

The Hidden Mistake Many Investors Make Before Retirement

One of the biggest planning mistakes happens when investors continue treating their portfolio exactly the same way at age 63 as they did at age 43.

The investment strategy that helped grow wealth may not be the same strategy that protects retirement income.

As retirement approaches, the focus should gradually shift from:

• Maximum growth

to

• Income durability and lifestyle protection

This does not mean abandoning growth.

It means becoming intentional about which assets are exposed to market volatility and which assets are designated to support near-term retirement spending.

This is where experienced retirement income planning becomes extremely important.

A retirement income specialist helps answer questions such as:

• How much market risk is appropriate this close to retirement?
• Which assets should remain growth-oriented?
• Which assets should become more stable?
• How should income needs be segmented over time?
• How should retirement withdrawals adjust during market declines?
• How can taxes, Social Security, and income planning work together?

These are not just investment questions, they are lifestyle preservation questions.

How Proper Asset Allocation Helps Reduce Sequence of Returns Risk

Within roughly three to five years of retirement, many investors should begin thinking differently about portfolio construction.

This is not necessarily the time to sit entirely in cash or move everything into conservative investments.

But it is the time to think carefully about where retirement paychecks will come from during market declines.

A retiree who plans to begin withdrawals immediately after retirement may benefit from having portions of the portfolio allocated toward more stable assets such as:

• Treasury securities
• Bond ladders
• Treasury Inflation-Protected Securities (TIPS)
• Structured notes
• Other lower-volatility fixed-income strategies

The purpose of these assets is not necessarily to maximize return. The purpose is to create a ballast inside the retirement portfolio. A several year buffer against a negative during this critical time period.

When markets decline, these stable assets can help support retirement withdrawals temporarily so that equities have time to recover instead of forcing panic selling during downturns.

This becomes especially important because market recoveries often happen suddenly and violently. Investors who panic and move everything to cash after a decline frequently miss the recovery that follows. This risk-adapted ballast provides the peace of mind to weather natural market cycles.

Making changes because you were unprepared is a mistake can permanently damage how long your money lasts.

Why Retirement Income Planning Matters During the Fragile Decade

This is where comprehensive retirement income planning separates itself from traditional accumulation investing.

An experienced retirement income planner does more than manage investments.

They help retirees make adjustments during difficult markets without emotionally destroying the long-term plan.

That may include:

Rebalancing During Market Declines

If equities decline significantly while bonds or safer assets remain stable, a disciplined rebalance may shift money back into equities at lower prices.

This is emotionally difficult for most investors to do alone.

But rebalancing can help position the retirement portfolio for eventual recovery while maintaining the original risk design of the plan.

Guardrails-Based Spending Adjustments

Guardrails strategies involve adjusting retirement spending during strong or weak market environments rather than blindly increasing withdrawals every year regardless of market conditions.

For example:

• Spending may temporarily slow during prolonged bear markets.
• Inflation adjustments may pause temporarily.
• Larger discretionary expenses may be delayed.

These adjustments can dramatically improve long-term retirement portfolio sustainability while avoiding permanent lifestyle reductions.

Rising Equity Glide Paths

Research by Wade Pfau and Michael Kitces explored a strategy called a rising equity glide path.

Traditionally, investors reduce stock exposure as they age.

A rising equity glide path takes a different approach:

• Retirement begins with a somewhat more conservative allocation.
• Equity exposure gradually increases later in retirement.

The reasoning is that the earliest retirement years represent the greatest sequence of returns risk. Once retirees successfully move beyond the Fragile Decade, portfolios may tolerate greater growth exposure later.

This strategy is not appropriate for everyone, but it highlights an important principle:

Risk should be managed differently during the years immediately surrounding retirement.

What Retirees Should NOT Do During a Market Decline

Perhaps the most important message for retirees currently experiencing market fear is this:

Do not make permanent emotional decisions during temporary market declines.

Unfortunately, many retirees become most conservative after losses have already occurred.

That often leads to locking in losses permanently.

Fear can push investors toward drastic decisions such as:

• Selling equities near market lows
• Moving entirely to cash
• Locking money into long-term products during panic
• Abandoning long-term allocation strategies
• Making irreversible income decisions out of fear

These decisions can create what becomes a “decade of regret.”

This does not mean retirees should ignore risk.

It means they should seek experienced guidance before making major irreversible changes during emotionally charged markets.

A well-designed retirement income plan should already include:

• A withdrawal strategy
• Income segmentation
• Risk management
• Tax planning
• Rebalancing discipline
• Contingency planning

The goal is not eliminating volatility entirely.

The goal is preventing volatility from permanently destroying retirement lifestyle flexibility.

The Right Plan Matters More Than Ever Near Retirement

The years surrounding retirement are too important to rely solely on accumulation strategies built decades earlier.

A well-designed retirement income plan can help create flexibility during market declines, improve income durability, and reduce emotionally driven financial decisions during periods of uncertainty.

For investors approaching retirement, this is often the stage where thoughtful planning matters most.

Final Thoughts

The Fragile Decade is one of the most overlooked risks in retirement planning.

The years surrounding retirement carry more financial consequence than most investors realize because portfolio losses during this period can permanently alter spending power, retirement timing, and long-term financial security.

This is why retirement planning cannot simply be about maximizing returns.

It must also focus on:

• Managing withdrawal risk
• Protecting income stability
• Structuring proper retirement asset allocation
• Creating flexibility during market declines
• Avoiding emotional decision-making
• Coordinating investments with retirement income planning

For retirees and pre-retirees, the question is not simply:

“How much can I earn?”

The more important question may be:

“How vulnerable is my plan if markets decline at exactly the wrong time?”

Sources & Research

• Blanchett, David; Finke, Michael; Pfau, Wade. “Exploring the Retirement Risk Zone.” PGIM / ThinkAdvisor, March 2026. ThinkAdvisor Article
• Jess Bebel interviewing Wade Pfau, “What Is the Retirement Risk Zone?” Morningstar, April 2026. Morningstar Interview
• William Bengen, “Determining Withdrawal Rates Using Historical Data.” Journal of Financial Planning. Bengen 4% Rule Research
• Pfau, Wade & Kitces, Michael. “Reducing Retirement Risk with a Rising Equity Glide Path.” Journal of Financial Planning. Rising Equity Glide Path Research