For those using the bucket approach, it is important not to over-allocate to the safety bucket at the beginning of retirement. A protection window of around 5 to 10 years is often more appropriate. The reason is simple: preserving the ability to outpace inflation.

While a higher allocation to bonds may create a sense of safety, it can significantly limit long-term growth. This trade-off is especially critical early in retirement, when the portfolio still has time to compound. Overloading on low-yield assets at this stage can permanently weaken the retiree’s ability to recover purchasing power.

A similar concern applies to products like SPIAs. If purchased in a low interest rate environment, they can lock in suboptimal returns for life, reducing flexibility and long-term income potential.