For most of your working life, the math is simple: your paycheck arrives every two weeks, bills come in, you pay them, save what’s left, and the cycle repeats. Then one day the paycheck stops, and the math gets more complicated than most people expect.
Retirement can be is the longest financial event of your life. It can last 25, 30, even 35 years. During that stretch, your portfolio has to do something it has never done before: replace your income, keep up with inflation, weather market downturns, and last until the end. That is a tall order, and it’s the reason building a prudent retirement paycheck deserves more thought than the accumulation years that came before it.
The Math Changes When Withdrawals Begin
While you are working and saving, market volatility is uncomfortable but rarely dangerous. A bad year gets offset by another decade of contributions and compounding. Once you retire, that same volatility behaves very differently. You are no longer adding to the account, you’re pulling from it. Every withdrawal during a down market locks in a loss the portfolio you may not fully recover from when prices rebound.
This is the risk we talk about most often with families who are within five years of retirement on either side. We call it Bad Timing, the industry calls it sequence-of-returns risk. Two retirees with identical savings, identical withdrawal rates, and identical average returns can end up in very different places—one with a portfolio that comfortably lasts a lifetime, the other watching it possibly dwindle far too early—based entirely on when those returns happened to arrive.
The above illustration is hypothetical, is provided for educational purposes only, and does not represent the experience of any specific investor or the performance of any particular investment or strategy.
That’s a structural problem, and one that has to be solved before you stop working, because once the withdrawals begin, the window to fix it narrows quickly.
The Three Pillars
Over 30+ years of working with retirees, T. Ray Baker has built our approach around three sources of income working together. We call them the Three Pillars.
1. Predictable Income
Social Security, pensions, and certain annuity strategies can provide a baseline of monthly cash flow that is largely independent of short-term market performance. For many of the families we work with, this pillar covers most or all of the essential expenses, housing, food, utilities, healthcare premiums. When the non-negotiables are covered, many clients find greater confidence in their plan .
2. Investment Income
This is the potential growth engine, a diversified portfolio designed to generate withdrawals over decades, structured so you’re not forced to sell assets at the worst possible moment. Thoughtful asset allocation, tax-aware withdrawal sequencing, and ongoing rebalancing all carry their weight here.
3. Reserve Assets
Cash and short-term holdings that exist for one job: to protect the other two pillars when markets are uncooperative. When stocks are down 20%, you do not want to be selling them to pay a property tax bill. You want to draw from reserves and give the stock or bond portfolio time to recover. This pillar is the shock absorber, and it is the most commonly missing piece in retirement plans we review.
Each pillar does work that the other two cannot. Predictable Income is intended to cover the floor; Investment Income strives to drive long-term growth and inflation protection; Reserve Assets are intended to provide near-term flexibility. A plan that leans too heavily on any single pillar may be more fragile than it appears on paper.
Why Resilience Matters More Than Returns
Most of the families we work with did not get to retirement by chasing speculative returns. They got there by saving consistently, investing prudently, and making sound decisions across long stretches of time. Their retirement plan should reflect the same discipline.
T. Ray has been an advisor through the dot-com bust of 2000, the financial crisis of 2008, and the pandemic shock of 2020. Each of those events tested some retirement plans that had felt durable in calmer markets. In our experience, retirees with income structures designed in advance to absorb market downturns tend to weather those periods better than those attempting to react in real time.
A retirement paycheck built on the Three Pillars is designed to remain more durable across a range of market environments, including challenging ones. No strategy can eliminate all risk, and there is no assurance that any approach will achieve its objectives.
The Plan Is Only Part of It
A retirement income plan on paper is a starting point. The harder part is living with it for 30 years through markets, tax law changes, family transitions, and the unexpected. That is where the relationship with your advisor carries more weight than the framework itself.
When you call our office, you get us. Not a call center or a voicemail tree. The advisor who built your plan is the same person who picks up the phone when you have a question about a Roth conversion, a charitable gift, or a sudden change in your family. We serve families across generations, for as long as they need us and choose to work with us.
Where to Start
If you are within 10 years of retirement, or already retired and quietly wondering whether your current income plan will hold up, now is the right time to stress-test it.
We have put together a guide called “Your Retirement Paycheck: A Framework for Retirement Income Planning.” It walks through the Three Pillars in more detail, the questions worth asking about your own plan, and the decisions that tend to matter most. You can request a copy at no cost, or skip straight to a conversation.
Let’s Have the Real Conversation
If you’re approaching retirement, or already there, and the timing question is sitting heavier on you than it used to, we’d like to hear from you. These conversations come with no pressure and no sales pitch, just an honest look at where you stand today, what’s been weighing on you, and what a thoughtful plan could look like for your family.
Schedule a complimentary 15-minute call with our team by calling (972) 502-9340, emailing jackson.baker@parkwayteam.com, or booking online here.
We’re The Baker Team at Parkway Wealth Management Group. T. Ray Baker, a founding partner of Parkway and the leading advisor of our team, works alongside Chelsea, Gavin, and Jackson. Together we serve families across multiple generations.
Frequently Asked Questions
What is sequence-of-returns risk, and why does it matter in retirement planning?
Sequence-of-returns risk refers to the danger of experiencing poor market performance early in retirement while you’re actively withdrawing income. Even if your portfolio averages strong returns over time, early losses combined with withdrawals can permanently reduce your savings. This is why timing matters so much; retirement planning doesn’t plan around averages, but how returns unfold in real life. The Baker Team is available to help families build retirement plans designed to help manage market volatility, not just perform well on paper.
How can I protect my retirement plan during periods of market volatility?
A well-structured plan focuses on preparation rather than prediction. Strategies like maintaining a cash reserve for short-term expenses, diversifying income sources (such as Social Security or pensions), and establishing a tax-efficient withdrawal strategy can help reduce the need to sell investments during downturns. The goal is to create flexibility so your long-term investments have time to recover. The Baker Team works with families to create resilient retirement planning strategies that help clients remain focused on their long-term goals.
Should I change my retirement strategy when the market becomes volatile?
Reacting emotionally to short-term market swings can do more harm than good. In most cases, a disciplined approach (guided by a written, long-term plan) is more effective than making sudden changes. However, volatility can be a good time to revisit your strategy, stress-test your plan, and confirm that your income, withdrawal order, and tax approach still align with your goals. The Baker Team helps clients in Plano and Nacogdoches stay focused on long-term retirement planning while making thoughtful adjustments when needed.
About Jackson
Jackson Baker is a financial advisor at The Baker Team (located in Plano and Nacogdoches, Texas) who blends fresh insights with his family’s decades of experience to provide relatable, honest guidance for retirees and pre-retirees throughout Texas. Jackson is committed to a fiduciary standard and specializes in creating personalized strategies for retirement income, tax planning, and sequence-of-returns risk. He provides the long-term continuity that defines his multigenerational family practice, so clients have a trusted partner for decades to come.
Important Disclosures
Investment advisory services are offered through Parkway Wealth Management Group, a registered investment adviser. This article is provided for educational and informational purposes only and does not constitute investment, tax, legal, or accounting advice, an offer to sell, or a solicitation of any offer to buy any security. The views expressed are those of the author as of the date of publication and are subject to change without notice. The information has been obtained from sources believed to be reliable, but accuracy and completeness are not guaranteed.
References to the “Three Pillars” framework describe a general planning approach and are not a guarantee of any particular result. All investing involves risk, including the possible loss of principal. Diversification and asset allocation do not guarantee a profit or protect against loss. Past performance is not indicative of future results, and no strategy can assure success or protect against loss in a declining market.
Annuity products are insurance contracts; any income features or guarantees are subject to the claims-paying ability of the issuing insurance company and may be subject to surrender charges, fees, withdrawal limitations, and tax consequences. Social Security and employer pension benefits are subject to future legislative, regulatory, plan-specific, or funding changes. The hypothetical example presented is for illustrative purposes only, does not reflect any actual investor experience, and does not reflect the deduction of advisory fees, taxes, or transaction costs, which would reduce returns.
A complimentary initial consultation has no cost and creates no obligation to engage Parkway Wealth Management Group for advisory services. Any decision to engage the firm should be based on a review of the firm’s Form ADV Part 2A and Form CRS, available upon request or at the SEC’s Investment Adviser Public Disclosure website.
