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One of our advisors sat down with a client recently who had just received a cancer diagnosis. She wasn't panicking about her health (she had a strong care team). She was panicking about her money. "I've spent thirty years building this," she said. "I need to know it's going to be there, no matter what happens next."
That question carries a much heavier weight when a health crisis is looming. But here's the thing: you don't need a diagnosis to ask it. Every retiree with a serious nest egg should be asking the same question.
The shift from building wealth to protecting it is one of the hardest mental transitions in all of financial planning. For decades, the goal was growth. Now, the goal is making sure that growth actually lasts.
Why Smart People Still Lose Sleep Over This
If you've accumulated $1 million or more, you've already proven you know how to build wealth. But preserving it in retirement is a completely different skill. The market doesn't care about your timeline. A 20% drawdown in your first two years of retirement can permanently reduce your income, even if the market recovers. Researchers call it "sequence of returns risk," and it's one of the biggest threats to a retirement portfolio.
Then there's the threat that doesn't make headlines: inflation. At just 3% annual inflation, your purchasing power drops by nearly half over 20 years. That means a retirement budget of $80,000 today would need to cover what feels like $40,000 worth of goods and services two decades from now. For a 30-year retirement, the erosion is even more severe. Any serious withdrawal strategy has to account for rising costs, not just market dips. This is why holding some growth-oriented investments in retirement isn't optional; it's how you keep your income from shrinking in real terms year after year.
Layer on the possibility of long-term care (which roughly half of Americans over 65 will need at some point, according to the Department of Health and Human Services), and suddenly the stakes feel enormous. A single year in a private room at a care facility can run well over $100,000 in Arizona or Nevada. That's not a number you can ignore.
The Three-Bucket Approach
Here's what our advisor walked this client through. It's not a one-size-fits-all formula, but it's a framework that works well for people who want growth, safety, and protection all at once. As a rough starting point, many retirees find that something close to a 40/40/20 split works well: roughly 40% in guaranteed income, 40% in buffered growth, and 20% in flexible strategic holdings. Your actual allocation will depend on your expenses, health, other income sources, and goals, but that ratio gives you a mental model to start from.
Bucket 1: Guaranteed Income (The Foundation)
A portion of her 401(k) rollover went into an annuity structured to provide guaranteed monthly income she can't outlive. This is the money that covers her baseline expenses, no matter what the market does. Some of these contracts also include long-term care riders, which means if she ever needs extended care, the payout increases. That's two problems solved with one vehicle.
Bucket 2: Growth With a Buffer (The Engine)
Another portion went into buffered ETFs through Charles Schwab. These are investments that participate in market gains up to a cap, but include a built-in buffer against losses (often the first 10-15% of a downturn). You won't capture every last point of a bull market, but you also won't ride the full rollercoaster down. For someone in retirement, that tradeoff is often worth it. This bucket also plays a critical role in fighting inflation, because it keeps a meaningful portion of your portfolio participating in market growth over time.
Bucket 3: Strategic Holdings (The Flexibility)
The remaining assets stayed in a diversified portfolio designed for liquidity and opportunistic growth. This is the money that gives you options: inheritance planning, charitable giving (one of our clients recently used a charitable remainder unitrust funded by buffered ETFs), or simply the freedom to handle the unexpected.
Where You Hold Each Bucket Matters Just as Much
Most people spend a lot of time thinking about what to invest in, but not nearly enough time thinking about where those investments sit from a tax perspective. This is what advisors call "tax location," and it can make a meaningful difference in how long your money lasts.
The general principle: place your least tax-efficient holdings in tax-deferred accounts (traditional IRAs, 401(k)s), where growth isn't taxed until you withdraw. Your annuity income, for example, often fits well here because those payments are taxed as ordinary income anyway. Growth-oriented investments like buffered ETFs, which generate capital gains rather than ordinary income, can work well in a taxable brokerage account where you benefit from lower long-term capital gains rates. And your Roth IRA (tax-free) is the ideal home for assets you expect to grow the most over time, or for funds you want to pass to heirs without a tax burden.
Think of it this way: if you're going to owe taxes on withdrawals regardless, put those assets in the tax-deferred bucket. If an investment is already tax-friendly, let it sit in a taxable account. And reserve your Roth for the holdings with the highest growth potential or the ones you want to leave behind.
Getting this right won't change your returns on paper, but it can meaningfully change how much of those returns you actually keep.
Why the Combination Matters
No single product does everything well. Annuities provide certainty but limited growth. Stocks provide growth but no guarantees. Long-term care insurance solves one problem but can be expensive as a standalone policy, so bundling that protection inside a product you already need (like an income annuity) is often a smarter path.
The magic isn't in any one bucket. It's in how they work together.
What You Can Do This Week
Pull up your most recent retirement account statements. Ask yourself: if the market dropped 25% tomorrow, how would that change your monthly income? If you needed long-term care for two years, where would that money come from? If inflation runs at 3-4% for the next decade, will your income keep up? If you can't answer all three questions clearly, it's time for an annual review. You can also check IRS.gov (search "retirement plan distributions") to make sure your withdrawal strategy is tax-efficient.
If any of this sounds like your situation, that's exactly the kind of thing we help people sort out every day. Give us a call. No cost to you, no pressure, no pitch. Just a conversation about what makes sense for your money and your life.
Easy Eddie's Take
Here's what I tell folks: don't put all your eggs in one basket, and don't put them all in three baskets of the same kind either.
Think of it like a house. You need a strong foundation (that's your guaranteed income, like an annuity). You need walls that can flex a little in a storm (that's your buffered investments). And you need a savings jar on the shelf for surprises (that's your flexible money).
The client in this story split her retirement savings across all three. Now she's got income she can count on, growth that won't give her a heart attack, and long-term care protection baked right in.