The First Five Years of Retirement May Matter More Than the Previous 40

You can’t just cross your fingers and hope for a bull market.

I’ve lost count of how many people who’ve said to me, “I think I’ve saved enough. But I’m still not sure I can stop working.”

I understand why they feel that way. We spend 30 or 40 years building retirement savings. We contribute to our 401(k)s, fund Roth IRAs, invest month after month, pay down debt and hope we’re doing enough. We become so focused on reaching our “retirement number,” or date, that we don’t spend much time thinking about what has to happen after we get there.

Besides that, the amount we think we might need keeps moving. Northwestern Mutual’s 2026 Planning & Progress Study found Americans now believe they need $1.46 million to retire comfortably—a 15% jump from the previous year’s estimate. That’s a good reminder that there really isn’t one magic number. How you manage your money after you retire is just as important as how much you’ve saved.

To me, retirement isn’t the end of financial planning. It’s the beginning of a completely different kind of financial planning.

I always like to say your money has multiple jobs. While you’re working, your portfolio has one job: grow . . . and keep on growing. Once you retire, it has a much tougher assignment. It has to generate income, keep pace with inflation, weather market downturns and hopefully last the rest of your life. In other words, your portfolio has to replace most of your old paycheck.

That’s why I believe the first five years of retirement are critically important. It’s when you’ll make some of the biggest financial decisions of your life, such as:

• How much can you safely spend?

• When should you claim Social Security?

• How much investment risk should you keep?

• How much flexibility should you build into your plan?

• And how often should you revisit your plan as life changes?

These are decisions you can’t afford to get wrong. We tend to think retirement spending is all about how much we can withdraw every year. But it’s not just about how much you withdraw. It’s about where you withdraw it from, which accounts, and when.

It’s not a small distinction, and it can make a huge difference to your chances of not running out of money.

What This Looks Like for Different People

Let’s say you retire just before the market drops 20%. You still need income, so every month you’re selling stocks that have fallen in value just to pay your bills. Those shares are gone. They won’t participate when the market eventually recovers.

Okay, now imagine someone else who retired with the exact same portfolio but had enough cash and high-quality bonds set aside to cover a few years of living expenses. Instead of selling stocks during the downturn, they leave their stock portfolio alone and give it time to recover.

Both retirees may experience the same market over the next 30 years. They may invest in the same market for 30 years and earn the same average return. Yet one could run out of money years sooner.

Let’s say the two people each retire with $750,000 and both plan to withdraw $40,000 a year. One retires into a strong market. The other retires just before a major downturn and keeps withdrawing the same amount because the bills don’t stop. By selling investments while prices are down, that retiree can permanently reduce the portfolio’s ability to recover. Years later, one retiree may still have a healthy nest egg while the other could be facing the very real possibility of running out of money.

That’s what financial planners call sequence of returns risk, and it’s one of the least understood risks in retirement. Morningstar’s retirement research underscores just how important those early years can be. Under its modeling assumptions, retirees who experienced positive investment returns during their first five years had only about a 4% probability of exhausting their portfolios.

Turning Knowledge Into a Plan

You can’t go back in a time machine and make that decision again. The lesson isn’t that you just have to cross your fingers and hope for a bull market once you retire. None of us controls that.

The lesson is to have a plan for where your retirement paycheck will come from if the market has other ideas. Having cash and high-quality bonds available for near-term income can allow you to leave your stock portfolio alone during a downturn instead of selling investments at exactly the wrong time.

That’s just one example of why the first five years matter so much. The decisions you make about when to claim Social Security, how to draw retirement income, manage taxes and balance investment risk all work together. And they aren’t one-and-done decisions. As your life changes, your plan should change with it.

That’s why I encourage people to sit down with an experienced, fee-only fiduciary advisor in my Wealthramp network before they retire. Not someone who’s trying to sell you a financial product, but someone who can help you build a clear roadmap for the next 20 or 30 years—and adjust it as life unfolds.

The people who seem most comfortable in retirement aren’t always the ones with the biggest portfolios. More often, they’re the ones who know they have a thoughtful plan—and someone they trust to help them make good decisions along the way.

Get those first five years right, and you give yourself something that’s hard to put a price on: confidence. Not confidence that nothing will ever change, but confidence that you’ll know how to respond when it does.

P.S. Every financial situation is different. Here’s how to tell whether you’re getting good advice.