TRANSCRIPT
Speech-to-text transcription can look a little quirky. Please excuse any grammar or spelling errors.
#81 - Investing in Retirement - Part 2: Changing the Way You Think About Retirement
In this episode, Eric Blake continues the Seven Essential Strategies for Successful Investing in Retirement by exploring how retirees can rethink the purpose of their portfolio and reframe risk in a way that supports long-term financial confidence. He and cohost Wendy McConnell discuss behavioral challenges, the true objective of retirement investments, and how to protect purchasing power over a multi-decade retirement.
Introduction
Eric Blake: On today's show, we continue our series on the Seven Essential Strategies for Successful Investing in Retirement. In this episode, we turn our attention to what may be the most impactful strategies from a behavioral perspective—potentially changing the way you think about investing in retirement. Specifically, understanding the true objective of your retirement portfolio and reframing the way you think about risk in retirement.
Welcome to another episode of the Simply Retirement Podcast, where we want to empower and educate women to live your retirement on your terms. I'm your host, Eric Blake, practicing retirement planner with over 25 years of experience, founder of Blake Wealth Management, and I would not be the man I am today without the women in my life.
As we move through this series, each step is going to build on the last. In Episode One, we focused on the foundation—having a plan. Today, we'll dig into the mindset and behavioral side of retirement investing, and then in the next episode, we'll get into what I would call the core building blocks of your retirement portfolio. Finally, we'll bring it all together with strategies to minimize taxes and evaluate working with a financial professional during this critical phase of life.
Joining me once again on this episode is Wendy McConnell. Wendy, how are you?
Wendy McConnell: I'm good. How are you? Thanks for having me.
Eric Blake: I'm good. So, I have another granddaughter story here.
Okay. Because I figured out why grandparents get such a bad rap about letting the grandkids do whatever they want.
Wendy McConnell: Cause you didn't let your kid do that.
Eric Blake: According to her, we did not. No.
Wendy McConnell: Did I get it?
Eric Blake: Yeah. That was it.
Wendy McConnell: I'm sorry.
Eric Blake: But here is the thing: As soon as I see that little lower lip bubble up when she's about to cry, it hits me right in the heart.
Wendy McConnell: Yeah.
Eric Blake: I do not think I will ever be able to tell her no. I have come to grips with the fact that she is going to get whatever she wants. As long as she does not cry, I am good with it.
Wendy McConnell: You're not alone. I mean, this is what grandparents are known for.
Eric Blake: I know, but it is just reality setting in.
Wendy McConnell: You know, my sister had two girls, and she said that once she had her first baby, the first thing people would ask when they called was, “How is the baby? How is the baby?” She's like, “I do not think anybody has ever asked me, ‘How are you?’ since I've had children.”
Eric Blake: Yeah. I am Kaitlyn’s dad for the last 28 years. Or Eric’s dad—my son too. He does not have the grandbaby yet, so he has not gotten to experience that part. But one day. Maybe not too long. Who knows? I don't know. I am not pushing him into it, but good luck. The more the better, right?
Wendy McConnell: That's right.
Eric Blake: You never think you are ready to be a grandparent, but then all of a sudden she is saying… We were going with “Grandpa.” That was supposed to be what we were using. But now she’s already made it “Papa.” So I’m like, whatever she wants, I am good with it.
Wendy McConnell: Of course.
Eric Blake: The fact that she is saying it—that is the best part.
Strategy Question: Retirement Fears
Eric Blake: Alright, so let’s get into our topic today. I have a question for you to start us off, and you can respond either with how you would feel or how you think people in general would respond.
What do you think most people say when I ask them what their biggest fear in retirement is?
Wendy McConnell: Running out of money.
Eric Blake: Perfect. You got it.
Now, here is where it gets into the nitty-gritty. When I ask those same folks what they feel the primary objective of their retirement portfolio should be, what do you think they say?
Wendy McConnell: I’m going to guess they say protecting the money when they should be investing the money.
Eric Blake: Preserving principal.
Wendy McConnell: Okay.
Eric Blake: That is normally the response. Here is the problem: those two responses do not align. Saying, “I don’t want to run out of money, but I want to protect my principal”—those clash.
I am going to explain why that is, and that is going to be our next strategy: understanding the true objective of your retirement portfolio when you enter retirement.
Understanding Life Expectancy and Portfolio Objectives
Eric Blake: Let me give a little context first. When you think about life expectancy across demographics in the United States, you often hear that average life expectancy at birth is in the late seventies, maybe early eighties for women.
But here is what most people overlook: once you have already reached a certain age, your life expectancy becomes much longer.
For example, let’s take a non-smoking couple who retires at 62. Their joint life expectancy is about age 92, which means:
There is a 50% chance that one spouse will live at least 30 years in retirement.
Thirty years is a long time to preserve purchasing power.
This connects directly back to the two conflicting answers we just discussed: preserving principal and not running out of money. Those two things don’t naturally support each other.
Life Expectancy, Women, and Real-World Examples
Eric Blake: Now, as we all know—and we have talked about this on the show before—this is especially important for women because, statistically, women tend to live longer than men. That is just the average. But ultimately, women often end up carrying the responsibility of managing household finances at some point, potentially on their own, whether by choice, divorce, or widowhood.
And I have actually seen this play out in my own family. When my grandmother was 62, my grandfather passed away. As I’ve shared before, he was my father figure. My grandmother was 62 at the time, and she had a very similar mindset to many retirees. Back in the eighties and nineties, you could afford to be a little more conservative because interest rates were higher.
But she’s 90 now—she turned 90 in April—and she requires 24/7 care. It is very expensive, as most people would expect. Her money is dwindling. That is just the reality. But I would also say it has lasted much longer than it might have otherwise because we applied some of the principles we are talking about today.
When I first started helping her, she was very heavily weighted in CDs. Over time, especially during the long low-interest-rate environment we experienced for many years, that ended up being a negative. It created a roadblock. Now, 30-plus years later, we are seeing the impact of that.
Inflation and the Real Objective of a Retirement Portfolio
Eric Blake: At a 3% inflation rate—just 3%, which is the long-term historical average—prices more than double over a 30-year retirement. Even that 3% doesn’t match what we have seen in the last few years when inflation was 8% or 9%.
So the question becomes:
How do you combat inflation over a retirement that may last three decades?
Relying too heavily on fixed income—bonds, CDs, conservative assets—means you are essentially trading market risk for inflation risk, or what I call loss of purchasing power.
One of the biggest points I want you to take from this episode is this:
You must reframe risk in your retirement years.
Not thinking in terms of percentages…Not thinking about how much your account balance went up or down…Not asking, “What percent do I have in stocks or bonds?”
When you are in retirement, I want you to think about:
How many years of income you have set aside in your conservative “war chest.”
And then ask:
How long could I go during a market downturn before I would need to sell stocks?
That’s a much more meaningful measure of risk than percentages.
Reframing Risk: Thinking in Years, Not Percentages
Wendy McConnell: All right. You convinced me.
Eric Blake: Awesome. We’re all set then.
Before we move on, let me recap the major behavioral insights we have covered so far:
Key Points We’ve Covered So Far
Most retirees fear running out of money more than anything else.
Yet many believe their portfolio’s primary goal should be preserving principal.
Those two goals conflict, especially when inflation is considered.
Average life expectancy at birth is misleading; once you reach your 60s, your life expectancy extends significantly.
Women often outlive men and may eventually manage finances alone.
A 30-year retirement is common—and requires a strategy that protects purchasing power.
Relying too heavily on fixed income increases inflation risk.
The true objective of a retirement portfolio should be growth of income, not simply protecting principal.
Risk in retirement should be measured in years of income set aside, not in portfolio percentages.
Using the “War Chest” to Weather Market Downturns
Eric Blake: Let’s talk about how the war chest concept works during a downturn.
For example, let’s say:
You have a $1,000,000 portfolio
You withdraw 4% per year → $40,000
You hold 30% of your portfolio in conservative assets (bonds/cash)
30% of $1,000,000 = $300,000$300,000 ÷ $40,000 per year = 7.5 years of income already set aside
So instead of thinking, “I have a 70/30 portfolio,” I want you to think:
“I have 7.5 years of income set aside in my war chest.”
And here’s why that matters:
Even during the second-worst bear market in U.S. history—the 2008 financial crisis—a 7.5-year war chest would have been enough to avoid selling stocks at the bottom.
Applying the War Chest to the 2008 Crisis
Eric Blake: The market peaked in October 2007.It bottomed in March 2009.It did not fully recover until March 2013.
That is:
17 months from peak to bottom
5.5 years from peak to full recovery
Even in that extreme scenario—a once-in-a-generation event—the war chest approach worked.
You could have gone the entire downturn without selling a single share of stock at a loss.
Wendy McConnell: Okay. That’s four-ish years.
Eric Blake: Five and a half from top to top.
Wendy McConnell: Obviously I’m way more comfortable with stocks when you put it that way, but… once we are in year five, and we are not to the half yet, and we only have two and a half years left in the war chest… is that okay? Or is the 30% constantly…?
Depleting and Replenishing the War Chest
Eric Blake: It is not constant. You are truly depleting your war chest during the downturn. It is going to continue going down.
This is where discipline matters. If you are doing this on your own, you need the fortitude to stick with your strategy, knowing the method behind the madness.
Historically, a financial crisis-level decline is once-in-a-generation. The likelihood of another downturn that long is low—but not zero. That is why:
Investing in retirement is different from investing for retirement.
Before retiring, you must build the war chest. You cannot wait until the market is already down 30% and then ask, “What should I do?” The answer must exist before the downturn.
Different War Chest Sizes and What They Mean
Eric Blake: Now, the 70/30 split we’ve been discussing is just an example. There will be people who say, “I don’t want just seven and a half years. I want more.”
And that’s perfectly fine.
In most cases, we actually use a five-year buffer, or what we call a five-year war chest. Historically, even that would have gotten us through the worst part of the financial crisis.
Wendy McConnell: Right.
Eric Blake: But some people say, “I’d rather have seven years. I’d rather have ten.”
Here’s what that means:
A bigger war chest → more conservative portfolio
More conservative portfolio → lower long-term growth
Lower long-term growth → you may need to spend less
And that’s okay. But it’s a trade-off.
Wendy McConnell: Less fun.
Eric Blake: Exactly. Less fun. But that’s the decision:
Do you want a bigger cushion, or do you want more spending flexibility?
This is where we talk about the “sleep at night” factor. What helps you sleep better? Having more income set aside, or having more room to spend?
And for everyone, that answer is different.
Why Objective Guidance Matters
Eric Blake: It’s also hard not to be emotional about your own money. This is why having an objective third party—a financial professional with experience through different markets—can help guide you.
I have been doing this a long time. That means I’ve personally lived through:
The Y2K/2001 downturn
The 9/11 downturn
The 2008 financial crisis
The COVID crisis in 2020
The 2022 bear market
That’s four major bear markets in about 25 years.
It’s not a matter of if we see another 20% decline — it’s when.
If you’re in retirement, you must be prepared. You should already know:
What is my war chest?
How many years of income is in it?
What do I do if the market drops 25%?
How long can I fund withdrawals without selling stocks?
Those questions must be answered before the downturn.
What We Do When a Downturn Happens
Eric Blake: So what do we do? If the market drops 25%, we use the war chest.
We ask:
How many years of income do we have? Three? Five? Seven? Ten?That tells us how long we can avoid selling stocks.
Even during the second-worst bear market in history, five and a half years was enough to get from peak… to bottom… back to peak.
So if we face another financial-crisis-level event, the strategy still holds up.
Historically, the average bear market lasts:
12–18 months from breakdown to recovery
Not five years
Not even close
The 2008 crisis was a once-in-a-generation event. And even that scenario was survivable with a properly built war chest.
Maintaining the War Chest: Quarterly Reviews
Wendy McConnell: Yeah. Walk away from the craps table.
Eric Blake: Exactly.
Every quarter—whether you’re doing this on your own or with a professional—somebody should be reviewing your war chest balance and asking:
Do we need to refill it?
Has a year of income been withdrawn?
Where is the best place to refill from?
If someone is drawing income, they are actively depleting their war chest. The question becomes:
Where do we refill from?
Most of the time, stocks are the best place because:
Three-fourths of the time, stocks actually go up,
Despite what the headlines say.
Wendy McConnell: They never tell you when it goes up a significant amount.
Eric Blake: Right. And even the language—“The Dow dropped 200 points today”—doesn’t mean the same thing today as it did 30 years ago. But it gets eyeballs.
So the goal is to pull emotion out of it and rely on a disciplined process.
If you can’t do that on your own, that’s when working with a financial professional becomes important.
Recap of the Entire Behavioral Framework
Eric Blake: All right. Let’s recap everything we’ve covered so far:
1. The biggest fear in retirement is running out of money.
Almost everyone says this.
2. Preservation of principal alone won’t prevent that.
If you are not keeping up with inflation but are still spending money, you can run out—even if you never “lose” money in the market.
3. Average life expectancy at birth is misleading.
If you reach 62, your life expectancy extends dramatically.
4. Women often outlive their spouses and may manage finances alone.
5. A 30-year retirement is common.
Which means purchasing power must be maintained long-term.
6. Inflation is relentless.
At 3% per year, prices more than double over 30 years.
7. Relying too heavily on conservative assets increases inflation risk.
8. The true objective of a retirement portfolio is growth of income.
Not principal protection.
9. Risk should be viewed as years of income set aside.
Not percentages or short-term market moves.
10. A structured, disciplined war chest strategy helps you stay invested.
Especially during downturns.
Preparing for the Next Downturn
Eric Blake: Hopefully, all of this helps maintain your confidence during the next market downturn—because we will have one. It’s not a matter of if. It’s when.
And if you have:
A clear plan
A properly sized war chest
And a disciplined process for reviewing and refilling it
Then even during a difficult market—like 2008—you can stay invested without jeopardizing your retirement.
Closing Remarks
Eric Blake: All right. Thank you all for tuning in. And thank you, Wendy, as always, for joining me.
If you have more questions about investing in retirement, feel free to email me directly at eric@blakewealthmanagement.com. I read every email personally.
And if you’re looking for a personalized retirement plan that helps you make smart decisions around income, investments, and taxes, you can visit GetMySimplyRetirementRoadmap.com to schedule a call with our team.
Please don’t forget to like, follow, and share the show. And until next time, remember:
Retirement is not the end of the road. It’s the start of a new journey.
Content here is for illustrative purposes and general information only. It is not legal, tax, or individualized financial advice; nor is it a recommendation to buy, sell, or hold any specific security, or engage in any specific trading strategy.
All investing involves risk including loss of principal. Results will vary. Past performance is no indication of future results or success. Market conditions change continuously.
Information here is provided, in part, by third-party sources. These sources are generally deemed to be reliable; however, neither Blake Wealth Management nor RFG Advisory guarantee the accuracy of third-party sources. The views expressed here are those of Blake Wealth Management. They do not necessarily represent those of RFG Advisory, their employees, or their clients.
This commentary should not be regarded as a description of advisory services provided by Blake Wealth Management or RFG Advisory, or performance returns of any client. The views reflected in the commentary are subject to change at any time without notice.