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Note: The examples and case studies in this article are hypothetical but represent real situations I have encountered in my practice working with Washington State public employees. The moment right before someone pulls the trigger By the time a client is ready to retire, most of the hard work is already done. The pension option is chosen. The savings are in place. We have mapped out the income, the taxes, the healthcare bridge to Medicare. And then, right before retirement, the same thing happens almost every time. They pause. Then comes the question, usually some version of the same one. What if I do this, and the market drops the week after? Take Cheryl. She is a hypothetical county employee in her late 50s with about 30 years in PERS 2. She has done everything right. Saved steadily. Lived within her means. She is not scared of running out of money someday. She is scared of starting at the wrong moment. What the history actually says about timing So let me tell you what the research shows. Peter Lynch, who ran Fidelity's Magellan fund for years, once looked at what would happen to an investor with almost comically bad luck. Imagine you invested money every year for 30 years, from 1965 to 1995, but you always bought on the single worst day of the year. The very top, every time. You would have earned about 10.6 percent a year.1 Now imagine the opposite. Perfect timing, buying at the lowest point every single year. Your return would have been about 11.7 percent a year. Thirty years of the worst luck imaginable trailed thirty years of flawless timing by roughly one percentage point. The thing people lose the most sleep over turned out to matter far less than simply staying in the market. Why retirement changes the math Here is where I have to be honest, though. That study is about someone still working and adding money for decades. Time was on their side. When you are retired and pulling income out, you do not have 15 years to wait for a bad market to recover. The order your returns show up in starts to matter. A steep drop in your first few years, while you are selling to pay bills, can do lasting damage. So the goal is not to time the market perfectly. Nobody can. The goal is to never be forced to sell at the bottom. And that is exactly where being a Washington public employee gives you an advantage most people never have. What your pension really does Cheryl's PERS 2 pension pays her a guaranteed monthly benefit for the rest of her life. It is not tied to how the stock market performs.2 Read that again, because it is the whole point. Her paycheck in retirement does not care what the market did last week. It shows up the same in a boom and in a crash. When your core bills, the mortgage, the groceries, the utilities, are covered by a check that arrives no matter what, a falling market becomes something you can watch and wait out instead of react to. You are not a forced seller. That is a very different position than a private-sector saver whose entire retirement income depends on their portfolio. When the market drops 30 percent, they may have to sell investments at a loss just to cover the month. You do not have to sell anything. The war chest that fills the gap Of course, the pension rarely covers every dollar, especially in the early years before Social Security starts. That gap is what actually worries people. And it is fixable. For the money Cheryl will spend over the next several years, we do not leave it exposed to stocks. We hold it in what I call a war chest, roughly five years of planned withdrawals kept in high-quality, short-term bonds. When stocks fall, she spends from the war chest and leaves her stock investments alone to recover. When markets settle, we refill the bucket. There is a quiet bonus here too. Holding both stocks and bonds means that when stocks drop, we can rebalance, trimming the bonds that held up and buying stocks while they are cheap. It feels backward in the moment. It is one of the most powerful things a disciplined investor can do. The pension is the floor. The war chest is the buffer. Together they are why Cheryl can leave her stocks alone long enough for time to do its work. A few measured next steps So the fear that keeps people up at night, the fear of one bad day, is mostly the wrong thing to worry about. The better question is not “what if I pick the wrong moment?” It is “what am I forced to sell when the market drops?” For a Washington public employee who plans ahead, the honest answer can be nothing. If you are somewhere near where Cheryl is, start here. Map your expenses into two buckets: what your pension will cover, and what your portfolio needs to handle. Then make sure the money you will spend in the next several years is not sitting in the stock market. And remember this is one piece of a larger plan. When you claim Social Security, how you sequence withdrawals, and how you handle taxes all work alongside the pension. But it starts with knowing your floor. Get that right, and the next market drop becomes something you read about, not something you fear. Sources 1. PBS Frontline. "Betting on the Market: Interview with Peter Lynch." https://www.pbs.org/wgbh/pages/frontline/shows/betting/pros/lynch.html 2. Washington State Department of Retirement Systems. "Choosing Plan 2 or Plan 3." https://www.drs.wa.gov/choice/ -Seth Deal
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Note: The examples and case studies in this article are hypothetical but represent real situations I have encountered in my practice working with Washington State public employees.
The client who kept saying “one more year” Ron showed up to our call last fall with a spreadsheet he’d clearly been staring at for months. He’s 57. Public works supervisor for his county, nearly 30 years in PERS 2. Between his pension, his DCP balance, and what he and his wife have saved, the numbers worked. We ran them again. They worked again. Then he said the thing I hear more than almost anything else. “Let’s just give it one more year.” I asked him why. Markets felt shaky. Maybe a little more cushion. You know how it is. But I’d heard him say “one more year” the year before. And the year before that. At some point it stops being a financial decision. (He knew it too. He just hadn’t said it out loud yet.) When the math is done arguing with you Here’s what I’ve come to believe after working with public employees who are this close to the door. If you’ve got a pension coming, a DCP balance, and money in the bank, and the plan still checks out, no new number is going to set you free. A behavioral finance researcher named Daniel Crosby puts it bluntly. He says if you handed someone like Ron a crystal ball that guaranteed he’d be financially secure for the rest of his life, most people in his shoes still wouldn’t retire tomorrow. Sit with that for a second. If certainty isn’t the thing holding you back, then the problem was never the money. And no spreadsheet I build is going to fix a problem that isn’t on the spreadsheet. The two questions I started asking instead So now, when a client is clearly ready on paper but stuck in real life, I stop running projections for a minute. I borrow two questions from Crosby’s work. The first: if you knew for certain you’d be fine, would you walk away tomorrow? When the honest answer is no, that tells us something. There’s something work is giving you that doesn’t show up on a balance sheet. The second: what is that something? For a lot of folks, especially the ones who’ve spent decades inside one agency, work is where the people are. It’s the team. The problem to solve. The quiet pride of being good at something. Take that away on a Friday with nothing waiting on Monday, and the pension doesn’t help much. Crosby points out that men in particular tend to walk into retirement without much of a social life outside the job. I see it constantly. The financial plan is airtight and the life plan is blank. It doesn’t have to be a light switch One thing that’s helped my clients more than any withdrawal strategy is realizing retirement isn’t on or off. You don’t have to grind full-time until a Friday and then do nothing forever. Some of the happiest retired public employees I work with eased out of it. They went part-time first. Picked up some consulting. Kept one foot in the thing that gave them purpose while finally making room for the rest of their life. That middle path has a financial bonus too. Every year you hold off tapping your DCP or your personal savings is a year that money keeps working. Your pension gives you a foundation most private-sector folks would envy, which means you have more freedom to design a slow exit, not less. What actually fills the gap Crosby talks about five things the happiest retirees tend to have lined up before they leave. I think about them with clients now almost as much as I think about Roth conversions. Fun and leisure, the part everybody plans for. The social side, which most people don’t. Some kind of deep, absorbing work, paid or not, that makes you lose track of time. Something bigger than yourself, like volunteering or faith or community. And a reason to keep growing instead of coasting. Money really only buys the first one. The other four you have to go get on your own. That’s usually the part nobody warned them about. Where the planning actually comes in I’m a CPA, so I won’t pretend the numbers don’t matter. They do, and there’s real work to do before you leave. You have a pension option to lock in, and that survivor decision is permanent. You have a healthcare gap to bridge from your late 50s to Medicare at 65, and the PEBB rules deserve a careful look before you assume anything. You have Social Security timing to coordinate with everything else, and that one tends to reward patience more than people expect. That’s where I earn my keep. That’s the part I can build for you. But I’ve stopped pretending it’s the whole picture. A few honest next steps If you’re the one saying “one more year,” try Crosby’s first question this week. If certainty wouldn’t change your answer, the thing in front of you isn’t financial. Start sketching the life side while you’re still working. Who you’ll see. What you’ll build. What’s going to get you out of bed on a Tuesday in February. And let’s lock down the financial pieces so they can’t be the excuse: the pension election, the PEBB-to-Medicare bridge, the income plan that pulls from the right account at the right time. Ron and I are still working on his. The numbers were never really the holdup, and once he admitted that, the planning got a lot more useful. The plan on paper matters. I’ll always make sure yours is solid. But the retirement you actually want to live is a separate project, and it starts with being honest about what’s really keeping you at your desk. Note: The examples and case studies in this article are hypothetical but represent real situations I have encountered in my practice working with Washington State public employees.
Dale comes to our first video call with his statements already pulled up on his screen. He's a facilities manager for the county. Twenty-six years in, PERS 2, hoping to retire at fifty-eight. He's done the hard part. He saved steadily in his DCP. The money is there. So we start going through what he actually owns. Almost all of it sits in funds from one big, famous fund company. The kind of name you'd recognize from a commercial or a stadium. I ask him why those funds. He pauses. “I'm not sure,” he says. “They're a name I trust. I've seen them around forever.” I hear some version of that more often than you'd think. And it makes complete sense. We're wired to reach for what feels familiar. But familiar and better are not the same thing. And the space between them can quietly cost you. What the research actually found There's a simple experiment that shows this better than anything I can say. Researchers handed people two index funds and asked how they'd split their money. Same holdings. Same fee. Line by line, the exact same fund. The only difference was the name on the label, one familiar and one generic. There's no financial reason to prefer one over the other. The money should land somewhere near 50/50. It didn't. People put 65% into the familiar name and just 35% into the identical generic version1. They even guessed the unfamiliar fund was more likely to lose money, for what was literally the same investment1. The name didn't change anything inside the fund. It only changed how people felt about owning it. Why does that happen? Because familiarity lowers our sense of risk, whether or not the actual risk is any different2. We don't study the unfamiliar fund and decide it's riskier. We feel that it is, and then we look for reasons to back up the feeling. And before you assume this is a rookie mistake, it isn't. Even advisors managing money for wealthy clients show the same pull toward brand-name choices5. It's human, not amateur. Why the famous names tend to fall short Here's the part that surprises people. When you line up the actively managed funds from the big, famous fund families against the benchmarks they're trying to beat, most of them fall short. One analysis found that 69% of Goldman Sachs active funds lagged their benchmark or didn't survive. Even at Vanguard, a firm practically synonymous with smart investing, 63% of its active funds underperformed1. The star manager doesn't hold up much better. S&P tracks whether top funds stay on top, and not one of the top-performing U.S. stock funds at the end of 2020 was still in the top group four years later3. Not one. It gets worse once you realize the lineup you see today is already the highlight reel. The funds that stumbled badly were quietly closed or merged away, and their track records went with them1. So why do the recognizable names so often trail? Part of it is just math. Back in 1991, economist William Sharpe showed that after costs, the average actively managed dollar has to underperform the average index dollar by the amount of those costs4. Active and passive together own the whole market, so as a group the active side can't beat it after fees. Part of it is the business model. A big fund company gets paid for gathering assets, not for beating the market. A fund that grows from one billion to ten billion collects far more in fees whether or not it ever outperforms. And the name is recognizable largely because the firm spent a fortune making it that way. That spending comes out of someone's returns. Usually yours. This shows up beyond fund companies, too. Even in the “independent” advice world, private equity now controls close to a quarter of the assets under management6, which brings its own pressure on fees and service. None of that makes a firm bad. It just means the name on the door doesn't tell you whose interest comes first. What to do instead I don't want to leave you with a pile of discouraging data and no path forward. There's a better way to approach this. It just means trusting a different set of signals. Start with your pension. Your DRS pension is a stable, lifelong foundation that most private-sector savers will never have. That foundation is exactly what lets the rest of your money take sensible market risk, instead of reaching for whatever feels safest. From there, own broadly instead of betting narrowly. Almost no one beats the market reliably, and you can't know in advance who will, so own a wide slice of it and let it work. Then control the things you actually can. As a CPA, this is the piece I push hardest on. You can't dictate next year's return, but you can control what you pay in fees and taxes, and over a long retirement those add up. And ask better questions, of a fund or of the person recommending it. What does this fund cost? Can you explain why it's in my portfolio without pointing to a famous name or a recent hot streak? Are you a fiduciary, legally required to put my interest first? A measured next step is simple. Pull up your DCP and any IRA statements and write down what you own and what each piece costs. For every holding, ask whether you can explain why it's there, beyond the name. If you can't, that's worth a conversation, not a panic. Trusting the right things The point of all this isn't to stop trusting. Trust matters enormously in investing, because it's what keeps you in your seat when markets get scary. The problem is never that people trust. It's that so many of us trust the wrong things. So aim it carefully. Trust the weight of the evidence over the comfort of a logo you happen to recognize. When Dale and I rebuilt his portfolio, nothing about it would impress anyone at a dinner party. There were no names he'd recognize from a stadium. But he could explain every piece of it, and why it was there. That's the part that actually matters. Sources 1. Index Fund Advisors. “The Psychology of the Label: Familiar Names Can Make Poor Investments.” January 20, 2026. https://www.ifa.com/articles/psychology_label_familiar_names_make_poor_investments 2. Weber, E. U., Siebenmorgen, N., & Weber, M. “Communicating Asset Risk: How Name Recognition and the Format of Historic Volatility Information Affect Risk Perception and Investment Decisions.” 2005. https://scispace.com/pdf/communicating-asset-risk-how-name-recognition-and-the-format-2f8flbykyg.pdf 3. S&P Dow Jones Indices. “U.S. Persistence Scorecard.” https://www.spglobal.com/spdji/en/spiva/article/us-persistence-scorecard/ 4. Sharpe, William F. “The Arithmetic of Active Management.” 1991. https://web.stanford.edu/~wfsharpe/art/active/active.htm 5. Kostovetsky, L., & Warner, J. B. “Measuring Innovation and Product Differentiation: Evidence from Mutual Funds.” Journal of Finance, 2020. https://onlinelibrary.wiley.com/doi/10.1111/jofi.12853 6. AdvizorPro. “Private Equity Ownership in the RIA Space – 2025 Trends.” September 4, 2025. https://advizorpro.com/post/private-equity-ownership-ria-space Note: The examples and case studies in this article are hypothetical but represent real situations I have encountered in my practice working with Washington State public employees.
The spreadsheet that never says “enough” Greg is meeting with me, sharing a spreadsheet he built himself. He’s 54, a firefighter with more than twenty years on the job and a LEOFF 2 pension waiting at the end of it. He plans to hang up the gear in a couple of years. He has saved steadily for decades, put money into his DCP more years than not, and his numbers look good. And yet he keeps asking the same question three different ways. “But what if it’s not enough?” I hear some version of that from a lot of careful savers. They did everything right. They have the pension, the 457(b), and money set aside on top of it. On paper they are in great shape. The problem is they cannot feel it. You have been saving for a stranger There is a body of research that helps explain this. It comes from a UCLA professor named Hal Hershfield, who studies how we think about our future selves. His basic finding is a little strange. Most of us experience our future self almost like a different person1. Not quite a stranger, but not quite us either. That distance is not all bad. But it shapes every long decision we make about money. When you save for retirement, you are really saving for that other person down the road. The more connected you feel to them, the easier it is to make patient choices today. Here is the part I find most interesting. Hershfield and his colleagues tracked thousands of people over ten years. The ones who felt more similar to their future selves early on reported higher life satisfaction a decade later, even after accounting for income, age, and how satisfied they already were1. So the relationship you have with future you matters. And it keeps mattering long after you retire. Why the math feels scary even when it isn’t Greg saved well. He clearly cares about his future self. That should make retirement feel safe. But something flips at the finish line. Here is the strange part. He knows exactly how much money he has. What he does not know is how long it has to last. He could need it for five years. He could need it for thirty-five. That unknown is what makes careful people freeze. The worry is always the same. What if I run out? So they keep doing the thing that worked for twenty-plus years. They save. They wait. They tell themselves next year. The skills that make someone a great saver do not automatically make them a great spender. Those are different muscles. Your pension changes the equation This is where Washington public employees have an advantage most retirees do not. That “how long will it last” fear is mostly a problem for people living off a pile of savings alone. If your whole retirement is a 401(k) balance, every withdrawal feels like it shrinks the pile. Your pension works differently. It is income for life. It does not run out at year five or year thirty-five. It keeps paying as long as you do. When Greg and I separated his pension from his savings on that call, the question changed. It was no longer “will my money last.” A big chunk of his essential spending was already covered by a check that never stops. His savings and DCP sit on top of that floor. That is a very different feeling, and most people never reframe it that way. What actually helps A few things tend to move careful savers from frozen to comfortable. Start by naming your non-negotiables. What does your basic life actually cost each year? Housing, food, insurance, the ordinary stuff. Once you see that number, you can line it up against your pension and any Social Security you’ve earned, and see how much is already handled before you touch a dollar of savings. Then translate the plan into real money, not percentages. People hear that their plan has a high chance of success and still feel uneasy, because nobody can picture what a percentage means for their actual life. It lands better to say something concrete. You need this much to cover your life. You can comfortably spend this much more on the things you actually want. Give your money a job on purpose. Our brains do not treat all dollars the same, so use that. Earmark a specific withdrawal from your DCP for a specific trip, and it stops feeling like money leaving the pile and starts feeling like a plan you already made. And watch out for assuming future you wants exactly what present you wants right now. It comes up most on the big, hard-to-undo decisions. When you pick a retirement date, or decide when to claim Social Security, or weigh whether to move, it deserves a longer conversation than people usually give it. Spend some of it now One more idea from this work stuck with me. The early years of retirement, when you are healthy and active, are not guaranteed to last. Memories made with your family while everyone can still travel are worth something real, and you cannot buy them back later. Saving so hard that you skip those years does not protect your future self. It robs that person of memories they would have loved to have. Where to start You do not need to overhaul anything this week. Sit down and figure out what your basic year actually costs. Look at how much of that your pension covers before you touch your savings. Then have an honest talk with your spouse about what you want the first ten years of retirement to look like. If those numbers feel overwhelming, that is exactly the kind of thing worth walking through with someone who knows the Washington systems. You spent decades taking care of a future version of yourself. At some point, that person shows up. The kind thing is to let them enjoy what you built. Sources 1. Reiff, J. S., Hershfield, H. E., & Quoidbach, J. “Identity Over Time: Perceived Similarity Between Selves Predicts Well-Being 10 Years Later.” Social Psychological and Personality Science, 2019. https://www.anderson.ucla.edu/sites/default/files/documents/areas/fac/marketing/Hershfield/Reiff_Hershfield_Quoidbach_2019_SPPS.pdf The examples and case studies in this article are hypothetical but represent real situations I have encountered in my practice working with Washington State public employees.
The number on the news isn't the number that mattersA corrections officer reaches out the week the latest inflation report makes the news. He is 54 and plans to retire at 57 on his PSERS 2 pension. He has saved steadily, mostly through his DCP. And now a headline has him rattled. “Prices went up almost 4 percent,” he says. “What does that do to my plan?” It is a fair question. Over the 12 months ending in April 2026, consumer prices rose 3.8 percent, the fastest pace in almost three years.1 But here is what I tell him, and what I tell most people who ask. The inflation number in the news is almost never your inflation number. Two people can retire into the same economy and face very different risk. The gap between them usually comes down to a few things they can actually control. So instead of reacting to the headline, we walk through three questions. Question one: what is your personal inflation rate? The national number is an average. It is built from a big basket of goods and services meant to represent the typical household, with categories like shelter, food, energy, and medical care each carrying a different weight.1 Think of it like a statewide weather report. It might say the average high is 60 degrees. That tells you almost nothing about what to wear in your own zip code. He sits near the calm end of that range. His house is nearly paid off. His spending is steady. His biggest splurge is a fishing trip each fall. Now picture a different retiree. She leaves work at 58 and bridges to Medicare on PEBB coverage, so she is paying a health premium for seven years. She is also driving more to help an aging parent, right as fuel prices climb. Her budget leans on categories that have been rising faster than the average. Energy jumped 17.9 percent over the year, and gasoline rose 28.4 percent.1 Research on older households points the same direction. Retirees tend to spend more on healthcare, and healthcare prices often rise faster than the broad index.2 Same 3.8 percent headline. Two very different realities. Question two: how much of your income already keeps up? This is where Washington public employees have a real advantage, and where the details matter. Some of your retirement income is built to rise with prices. Social Security usually gets an annual cost-of-living adjustment.2 Many DRS pension plans include a cost-of-living adjustment too. It is worth knowing exactly how yours works before you retire. Your plan handbook on the DRS website spells it out. Then there is everything that does not automatically rise. Your portfolio withdrawals usually do not come with a built-in raise unless you design the plan that way. The tools built specifically to fight inflation are Treasury Inflation-Protected Securities (TIPS), I bonds, and stocks.4 Stocks are not a reliable hedge in any single year. But over long stretches they have been one of the best defenses against rising prices.4 Over the last century, inflation has averaged roughly 2.9 percent a year.3 Cash and traditional bonds are the opposite. They pay you in fixed dollars, so high inflation quietly eats their real value.4 This is why your pension matters so much. It is an income floor that lets the rest of your money stay invested for growth. Question three: where are you on your timeline? Timing might be the most overlooked piece. High inflation early in retirement does lasting damage. If prices jump in your first few years, your baseline spending resets higher, and every future year builds from that higher number.3 Researchers compare this to sequence-of-returns risk. A bad stretch early, when your time horizon is longest, hurts far more than the same stretch later.3,4 The worst historical outcomes for retirees clustered around the high-inflation years of the late 1960s and 1970s.4 While you were working, a raise could help offset rising prices. In retirement, that built-in cushion is gone.4 The point is not to predict inflation. It is to build a plan flexible enough to absorb it. What actually helps A few measured steps, not a fire drill. Map your own basket. List your real spending categories and notice which ones run hot. For an early retiree on a PEBB bridge, that is often healthcare. This turns a vague worry into something you can measure. Know your two COLAs. Confirm how your DRS pension adjusts, and remember Social Security carries its own annual adjustment. Together they cover a meaningful share of your fixed costs. Keep real stock exposure. Because your pension covers the floor, your portfolio can stay invested for the long-term growth that actually outpaces inflation. Build a war chest. I generally like keeping around five years of planned withdrawals in high-quality, short-duration bonds, spread across pre-tax, Roth, and taxable accounts. That way you are never forced to sell stocks in a down year, and you keep flexibility on which dollars to spend for tax reasons. Stay flexible. In a hot year, maybe you skip the full raise on your withdrawals, or push a big trip out a few months. None of it is permanent. Early on, small adjustments protect the whole plan. The bottom line He does not need to forecast inflation. Neither do you. What he needs is a plan that already expects uncomfortable years and is ready for them. Room to adjust. Room to draw from the right accounts at the right time. Room to let long-term investments do their job. Inflation will always be part of retirement. The goal is not to eliminate it. It is to keep rising prices from quietly running your decisions. As a CPA and financial advisor, and a former public employee myself, that is the work I find most rewarding: turning a scary headline into a handful of choices you control. Sources
The examples and case studies in this article are hypothetical but represent real situations I have encountered in my practice working with Washington State public employees.
The conversation no one wants to haveMost of the planning conversations I have with clients focus on offense. How much they've saved. How their DCP is invested. When to claim Social Security. Whether they should take Option 2 or Option 3 on their DRS pension. That's the fun stuff. But every once in a while, the conversation shifts to something quieter. The kind of risk you can't fix with a higher savings rate or a smarter tax strategy. What happens if you get sued? It's not a fun question. For someone who's spent thirty years building a retirement, though, it's worth sitting with for a few minutes. Picture a hypothetical client. Let's call her Sarah, a PERS 2 member with 29 years at a county public works department, planning to retire at 62. She's done everything right. Pension on track, DCP balance in the mid six figures, a paid-off house in Thurston County. Then one afternoon she's driving home from a doctor's appointment, misjudges a yellow light, and seriously injures another driver. That's the kind of moment umbrella insurance is built for. Why this still matters in retirementThe instinct in retirement is to assume liability risk goes down. The kids are grown. The commute is gone. Life slows down. The risk doesn't really disappear, though. It just moves. More driving for errands and appointments. More grandkids at the house. More travel. More volunteer roles. More time hosting friends and family. The real difference isn't probability. It's consequence. At 45, a major lawsuit is painful but recoverable. You still have decades of paychecks ahead. At 65, the savings you have are largely what you have1. Umbrella insurance sits on top of your auto and homeowners liability coverage and kicks in when those limits are exhausted2. For a few hundred dollars a year, it can add a million or more of protection. That's what makes it one of the more efficient pieces of a retirement plan. What about my DCP and other retirement accounts?Not all of your savings carry the same protection. The DCP, which is a 457(b) governmental plan, generally has strong creditor protection while the money stays inside the plan3. Most 401(k)s and 403(b)s sit in a similar category, so any old employer accounts you've held onto are typically in good shape too. The picture can shift when you roll your DCP to an IRA. That's a move many of my clients make at or near retirement for more investment flexibility and easier coordination of withdrawals. Under federal bankruptcy law, dollars rolled from a qualified plan generally keep their protection inside an IRA4. IRAs built from your own direct contributions, on the other hand, are protected only up to a federal cap, currently a little over $1.7 million per person, with state law filling in the rest beyond that. Your DRS pension itself is paid as monthly income and has its own set of rules around garnishment. For anything specific to your situation, that's a conversation with an asset protection attorney. The point here is just that "I have a lot in retirement accounts" doesn't automatically mean "I'm fully protected" in every scenario. 5 mistakes I see people makeAssuming all retirement money is untouchable. The protection picture is uneven, especially after rollovers. Once money leaves your DCP or an IRA and lands in your checking, savings, or brokerage account, the protection often changes3. RMDs that sit in cash, or large withdrawals set aside for taxes, can become exposed. Letting underlying coverage drop too low. Most umbrella carriers require minimum liability limits on your home and auto policies. If you trim those limits to save money in retirement, you can accidentally disqualify yourself from your own umbrella policy. Always ask your insurance agent what minimums you need to maintain5. Assuming new risks are automatically covered. Retirement often brings new toys and new responsibilities. A boat, a second home, a rental property, a board seat at the HOA or a nonprofit. Some of those are covered. Some require a separate endorsement. Some are excluded altogether. Tell your insurance agent when something meaningful changes. Waiting until you feel at risk. Umbrella policies only cover incidents that occur after coverage is active5. You can't buy a policy the week after a car accident and expect it to apply. The right time to put coverage in place is when nothing is happening. Treating it as set-it-and-forget-it. A policy that fit at 58 may not fit at 70. Home values rise, assets grow, liability costs change. Build an annual insurance review into your planning routine, the same way you'd review your pension option or your beneficiary designations. A simple way to size your policyThe common rule of thumb is to match coverage to your net worth. That's a fine starting point, but it ignores the layers of protection you may already have. A more honest version of the math: Start with your net worth. Then subtract home equity that's protected under Washington's homestead exemption. Under RCW 6.13.030, the exemption is the greater of $125,000 or your county's median single-family home sale price from the previous year6. So the protection varies a lot depending on where you live. A homeowner in King or Snohomish County gets meaningfully more shielded equity than someone in a rural county, and the exemption applies to your equity, not the home's full market value7. Next, subtract retirement accounts that already have strong creditor protection. Then subtract the liability limits already in place on your auto and homeowners policies. What's left is a rough estimate of the gap an umbrella policy might need to fill. One quick note on pricing. The first million of umbrella coverage is usually the most expensive. After that, each additional million is often much cheaper. The difference between "barely enough" and "comfortably more than enough" may only be a couple hundred dollars a year. A few measured next stepsIf you don't have an umbrella policy, ask your insurance agent for a quote and a clear list of what isn't covered. If you do have one, pull up the declarations page and check two things. First, are your underlying auto and home liability limits high enough to keep the umbrella in force? Second, are legal defense costs paid inside or outside the policy limits?That second detail can quietly cut your real coverage in half during a serious claim. For someone in Sarah's spot, with a DRS pension foundation, a healthy DCP balance, and a house with real equity, umbrella insurance won't show up on a performance report. It doesn't compound over time. But it's one of the quieter pieces of a well-built retirement plan, and worth getting right while nothing is happening. Sources1. Sheppard Law Firm. "Never Go Without an Umbrella." https://www.sheppardlawfirm.com/never-go-without-umbrella/ 2. Investopedia. "Umbrella Insurance Policy." https://www.investopedia.com/terms/u/umbrella-insurance-policy.asp 3. Equifax. "How to Protect Your Retirement Account From Creditors." https://www.equifax.com/personal/education/life-stages/articles/-/learn/protect-retirement-account-from-creditors/ 4. Investopedia. "Is My IRA Protected in a Bankruptcy?" https://www.investopedia.com/ask/answers/081915/my-ira-protected-bankruptcy.asp 5. National Association of Plan Advisors. "Case of the Week: Creditor Protection and Retirement Assets." January 2025. https://www.napa-net.org/news/2025/1/case-of-the-week-creditor-protection-and-retirement-assets/ 6. Washington State Legislature. RCW 6.13.030, "Homestead exemption amount." https://app.leg.wa.gov/rcw/default.aspx?cite=6.13.030 7. Washington State Legislature. Chapter 6.13 RCW, "Homesteads." https://app.leg.wa.gov/rcw/default.aspx?cite=6.13&full=true Why the Year You Retire Might Matter More Than How Much You've Saved
The examples and case studies in this article are hypothetical but represent real situations I have encountered in my practice working with Washington State public employees. Two retirees, same plan, very different endings Imagine two retirees with identical financial plans. Both have a $1 million portfolio. Both use a 60/40 allocation. Both follow a 4% withdrawal rate adjusted for inflation. Both plan for a 30-year retirement. The only thing that's different is the year they retired. One walked out the door at the end of 1973. The other walked out at the end of 1975. Just two years apart. Thirty years later, the 1973 retiree finished with about $280,000. The 1975 retiree finished with nearly $3.4 million¹. Same portfolio. Same strategy. Same length of retirement. Two very different outcomes. I came across this comparison in a recent research paper, and I haven't been able to stop thinking about it. What the research actually looked at The paper, written by Yorgos Argyros, analyzed nearly a century of market data going back to 1929². It studied 97 different 30-year retirement cohorts and asked a question that doesn't get nearly enough attention in retirement planning. How much does your exact retirement date affect the outcome of your plan? Not whether you retire at 55 or 60 or 65. But whether you retire this year, next year, or two years from now. For each retirement life cycle, the study tested five different retirement dates. The original date. One year earlier. Two years earlier. One year later. Two years later. Retiring exactly on schedule was only the best choice about 15% of the time. Delaying by one or two years was the best choice in nearly two-thirds of the historical cohorts¹. And here's the part that stopped me cold. Of the scenarios where the retiree actually ran out of money before the 30-year mark, every single one could have survived just by shifting the retirement date within that two-year window¹. Not a different withdrawal rate. Not a different asset allocation. Just a different year. Why timing has such an outsized effect Most of us have heard of sequence of returns risk. The idea that when bad returns show up matters as much as how bad they are³. A losing year early in retirement does more damage than the same losing year later, because you're pulling money out of a shrinking pile. But the research separates this risk into two pieces that I think are worth understanding. The first is what the author calls cohort risk. This is simply the risk of retiring into a particular market environment. Someone who retired in the early 1980s walked into a fundamentally different decade than someone who retired in the late 1960s¹. The second is pure sequence risk. The order of returns within your retirement period working against you. When he broke down the numbers, he found that roughly 75% of the variation in retirement outcomes came from cohort risk. Only about 25% came from sequence risk¹. In other words, three-quarters of how your retirement turns out depends on which decade you retire into. Most of the strategies financial advisors talk about (dynamic withdrawals, guardrails, glide paths) operate inside that 25% slice. Your retirement date is one of the few levers that can move you into a different cohort entirely. Bigger nest eggs sometimes led to worse results Here's another finding that surprised me. When the study connected the saving years to the retirement years, it found that larger portfolios at retirement often led to worse outcomes¹. The explanation makes sense once you sit with it. The same strong bull market that builds an unusually large portfolio can also pull future returns into the present. By the time you retire, much of the good news may already be reflected in prices. The next decade then has a harder time keeping up. For Washington State public employees, this is worth pausing on. If your DCP balance has grown rapidly over the last several years, that's a great thing. But the portfolio balance itself doesn't tell you everything about what comes next. The three-part playbook, in priority order The research lays out three strategies, and the order matters. First, look at the retirement date itself. This is the most powerful lever because it's the only one that directly addresses cohort risk¹. That doesn't have to mean working full time for two more years. It could mean part-time work, consulting, or using a war chest of three to five years of withdrawals in short-duration bonds so you can delay touching the equity side of the portfolio. Second, if you can't or won't delay, lower the starting withdrawal rate. In the analysis, dropping from 4% to 3.5% eliminated every historical failure in the bottom third of cohorts¹. On an $800,000 portfolio, that's the difference between starting with $32,000 of withdrawals instead of $28,000. The trade-off is real, but it buys flexibility during the most fragile years. Third, use dynamic spending rules. Guardrails and other flexible withdrawal approaches⁴ can help you respond to bad early returns by trimming spending temporarily. They don't change the market you retired into, but they can soften the blow if the first decade is rough. What this means for PERS, TRS, and LEOFF members If you're a Washington State public employee, you already have something most private sector retirees don't. A pension. Your DRS pension is a guaranteed income floor that isn't subject to market timing risk. That's a real advantage, and it gives you more flexibility on the other three levers than you might realize. If the next decade turns out to be a difficult one for retirees, your pension keeps paying regardless. That means your portfolio has more breathing room to recover, and you have more room to adjust the rest of the plan, whether that's lowering the initial withdrawal rate, leaning on a war chest, or even shifting how your equity exposure evolves over time⁵. It also means the retirement date question is worth taking seriously. Not because you should panic about market valuations. But because retiring on a specific birthday or a specific year, just because the plan always assumed that date, may be worth a second look. The research isn't saying everyone should delay retirement. It's saying retirement timing deserves more attention than it usually gets. Sources
Note: The examples and case studies in this article are hypothetical but represent real situations I have encountered in my practice working with Washington State public employees. There’s a pattern I keep seeing, and it’s become one of the more interesting things about this work. Someone comes in with a PERS 2 or TRS 2 or LEOFF 2 pension nearly locked in, a solid DCP account they’ve been building for years, Social Security waiting in the wings, and no debt. By every measurable standard, they’re in good shape. And then they mention they’ve been losing sleep over a market headline. Take someone like Diane, a hypothetical but very realistic example. She’s a school administrator with 27 years in, planning to retire at 58. Her pension will cover her core monthly expenses. Her DCP account has grown steadily. She has no mortgage left to worry about. And she’s still anxious. When I ask what’s bothering her, it almost always comes down to the same question: “Why doesn’t this feel like enough?” That gap between having enough and feeling like you have enough is one of the most underdiscussed problems in retirement planning. And recent research helps explain why it exists, and what actually closes it. It’s not just you The Global Financial Literacy Excellence Center found that roughly 60 percent of American adults report feeling financially anxious.1 And a notable share of those people aren’t struggling financially. They’re people who, by most measures, are doing fine. As a Wall Street Journal piece put it, even wealthy retirees fear outliving their money.2 The anxiety isn’t really about the account balance. It’s about something else. Fidelity’s 2026 State of Retirement Planning Study sheds some light on what that something else actually is. Among Americans surveyed, those who had a written financial plan were more than twice as likely to feel confident about retirement as those without one. 83 percent confident versus 38 percent.3 Same economy. Same Social Security rules. The plan was the differentiator. So what does that actually mean? I’d break it down into four things I consistently see in people who feel genuinely secure heading into retirement. Not one of the four is about the size of their account. Pillar 1: A real plan, written down This sounds almost too obvious. But there’s a reason it matters more than people expect. Retirement has a lot of moving parts. Pension income. DCP withdrawals and timing. Social Security decisions. The healthcare gap between early retirement and Medicare at 65. Tax brackets shifting year to year as income sources change. That’s a lot to carry around in your head. When all of it lives in your head, every market drop and every scary news article triggers a new wave of “what if.” There’s nothing to anchor to. A written plan does something your account balance can’t. It gives your brain a place to put the uncertainty. It pre-answers the questions: Where is income coming from? What changes if markets fall? What’s the healthcare plan from 58 until Medicare kicks in at 65? The Schwab Modern Wealth Survey found that only about 36 percent of Americans have a written financial plan. But among those who do, 96 percent say they feel confident they’ll reach their goals.4 Clarity is the antidote to anxiety. The plan creates the clarity. Pillar 2: Knowing your actual numbers Having a plan matters. But a plan without real numbers is just an outline. Research from the FINRA Investor Education Foundation found that fewer than half of pre-retirement workers have actually estimated how much monthly income they’ll need, how much to withdraw from their portfolio each year, or what their healthcare costs are likely to be.1 Fewer than half. Right before the most important financial transition of their lives. For Diane, this is where the real work happens. Her pension covers the baseline, but she needs to know the gap. What does her actual monthly spending look like? What does her DCP need to contribute? And what does healthcare cost from 58 until she qualifies for Medicare? Fidelity estimates that a 65-year-old retiring today can expect to spend an average of $172,000 on healthcare throughout retirement, and that doesn’t include long-term care.5 For someone like Diane who retires at 58 and bridges PEBB coverage for several years before Medicare, that number starts earlier and runs longer. In someone’s head, that blurs into one big source of dread. In a written plan with actual numbers attached, it becomes a series of solvable problems. Pillar 3: Knowing what you’re retiring to This is the one that tends to catch people off guard. A well-built plan can tell you whether the numbers work. It can show you how much you can spend, where income comes from, and what happens if markets or healthcare surprise you. What it can’t tell you is what your life will feel like when work is no longer at the center of it. I’ve seen this pattern enough times in my work with public employees that it’s become something I bring up proactively. Someone retires with a full pension, solid savings, and a farewell party. Everything looks fine on paper. But they hadn’t thought through what a regular Tuesday in January looks like. Not a vacation. An ordinary day. Who are you with? What are you working on? What gets you out of bed? For people who spent 25 or 30 years in public service, teaching, or law enforcement, the job is often bound up in their sense of purpose and community. The pension solves the income problem. It doesn’t solve the identity problem. Fidelity’s 2026 study found that 6 in 10 Americans now plan to transition gradually into retirement rather than stopping all at once.3 That path is worth designing intentionally. If the question “what am I retiring to?” feels hard to answer, that’s useful information. It tells you where there’s more planning to do. Pillar 4: A second set of eyes I’ll be upfront: this one is awkward to write, because I’m a financial advisor making the case that people should work with a financial advisor. Make of that what you will. But Fidelity’s research found that people who work regularly with a financial professional report meaningfully lower worry in retirement.3 And the reason isn’t investment selection or tax strategy. It’s that when markets fall and the headlines turn ugly, you’re not alone with the question of what it means for your specific situation. Schroders’ 2025 retirement survey found that 62 percent of already-retired Americans had no idea how long their savings would last.6 They crossed the finish line and were still flying blind. Meanwhile, 90 percent of Americans say planning is still necessary after you retire.3 Yet most retirees are doing it without one. The second set of eyes matters most not when things are going well, but when something changes and you need to know what it actually means for you. Where this leaves Diane Back to our hypothetical school administrator. Her pension is a genuine advantage. It’s the income floor that most Americans don’t have. It creates flexibility and stability that changes the whole picture. But the pension alone doesn’t close the gap between having enough and feeling like you have enough. What closes that gap is being able to see the whole picture. Income, taxes, healthcare, spending, and the life she’s retiring into, all in one place, modeled out and updated as things change. The anxiety lives in the gap between what you have and what you can see. A plan is how you close it. Sources 1. FINRA Investor Education Foundation. “Financial Anxiety and Stress Among U.S. Adults.” Global Financial Literacy Excellence Center. https://gflec.org/wp-content/uploads/2021/09/Financial-Anxiety-and-Stress-Issue-Brief-1.pdf 2. The Wall Street Journal. “Even Rich Retirees Fear Outliving Their Money.” https://www.wsj.com/personal-finance/retirement/retirement-spending-longer-life-savings-4b511053 3. Fidelity Investments. “Fidelity Investments Study: 72% of Americans Say They Will Retire on Their Own Terms as They Embrace New Approaches to Retirement Planning.” 2026. https://newsroom.fidelity.com/pressreleases/fidelity-investments--study--72--of-americans-say-they-will-retire-on-their-own-terms-as-they-embrac/s/609fbcb7-3ea5-4773-a300-0659da881d2a 4. Charles Schwab. “Modern Wealth Survey 2025.” https://content.schwab.com/web/retail/public/about-schwab/schwab-modern-wealth-survey-2025-wave2-findings.pdf 5. Fidelity Investments. “Fidelity Investments Releases 2025 Retiree Health Care Cost Estimate.” https://newsroom.fidelity.com/pressreleases/fidelity-investments--releases-2025-retiree-health-care-cost-estimate--a-timely-reminder-for-all-gen/s/3c62e988-12e2-4dc8-afb4-f44b06c6d52e 6. Schroders. “Schroders Retirement Study Finds Inflation Taking Toll on Retirees.” 2025. https://www.schroders.com/en-us/us/intermediary/media-center/schroders-retirement-study-finds-inflation-taking-toll-on-retirees/ -Seth DealNote: The examples and case studies in this article are hypothetical but represent real situations I have encountered in my practice working with Washington State public employees.
I’ve noticed a pattern with the clients I work with. When the Social Security question comes up, most people have already made up their mind before we even start talking. They’ve heard the advice. Wait until 70. Get the biggest check possible. End of story. And honestly, the math behind that advice is real. Claim at 62 and your benefit gets reduced. Wait until 70 and it can be roughly 77% higher than if you had claimed at 62.1 That’s not nothing. But here’s what I’ve started to notice. That number, the size of the monthly check, is only one piece of the puzzle. And for a lot of Washington State public employees, it may not even be the most important piece. The question most people aren’t askingLet me walk through a hypothetical that captures what I’ve seen in practice. Imagine someone like Karen. She’s 62, wrapping up a 28-year career as a budget analyst with a state agency, and she’s enrolled in PERS 2. Her pension is going to replace a meaningful portion of her income, but she’s also built up a solid DCP account (the 457(b) plan available to many Washington public employees2). She’s been told to wait until 70 for Social Security. And on the surface, that sounds right. But when we sit down and actually look at her full picture, a different question starts to matter more. Not “which age gives me the biggest check?” but “which claiming age gives me the best after-tax outcome for my entire retirement?” Those are not the same questions. Where the math gets more interestingHere’s the part most people don’t think about. Every dollar Karen pulls from her DCP or traditional IRA is taxed as ordinary income at the federal level.3 If she’s not drawing Social Security yet, she’s relying entirely on those accounts to fund her life in the early years of retirement. That’s fine, but those are fully taxable dollars going out the door every month. Social Security is taxed differently. Up to 85% of the benefit may be subject to federal income tax, depending on total income.4 But a minimum of 15% is always federally tax-free, regardless of how much other income you have.4 That’s a real difference. The same dollar of living expenses, funded from Social Security instead of her DCP, carries a lower federal tax cost. And over several years of early retirement, that adds up. The Roth conversion windowThis is the part of the conversation that most people miss entirely. Karen has a window of time between when she retires and when required minimum distributions kick in around age 73.5 That window is valuable. It’s a chance to convert pre-tax money from her DCP or IRA into a Roth account, paying tax now at a potentially lower rate, so future withdrawals are tax-free.5 But here’s the challenge. Every dollar she pulls from her DCP for living expenses takes up tax bracket space. And every dollar she wants to convert to Roth also takes up that same space. They’re competing. If Karen takes Social Security at 62, even at the reduced amount, she needs less from her DCP each year to cover her expenses. That frees up room in her bracket. And that room can go toward Roth conversions instead. The goal isn’t to convert as much as possible as fast as possible. The goal is to convert strategically, filling each tax bracket thoughtfully over several years. That means knowing in advance where the guardrails are. As conversion amounts increase, total income rises with them. That can push into Medicare’s IRMAA thresholds, which trigger higher Part B and Part D premiums.6 Those thresholds change annually, so this is something to model each year, not just once. A good plan accounts for this from the start and builds around it rather than getting caught off guard. Social Security, when timed as part of this broader picture, doesn’t compete with Roth conversions. It actually creates more room to do them well. A pension changes the whole pictureHere’s something I think about a lot folks who have a pension. Karen’s pension is already going to provide a base of income in retirement. It’s not optional, it’s not market-dependent, it just shows up every month.2 That changes what she needs her portfolio to do. She doesn’t need her DCP and IRA to replace her entire paycheck. The pension handles the foundation. That means the DCP has a different job: flexibility, tax management, and long-term growth. When someone has a pension as their income floor, the case for draining that account aggressively in early retirement just to delay Social Security gets weaker. The math changes. So when does waiting until 70 still make sense?It does sometimes. I want to be honest about that. If Karen has serious reasons to expect a long life, or if she’s the higher-earning spouse and survivor benefit planning is a priority, waiting can absolutely be the right call. The break-even analysis is legitimate. It usually works out somewhere in the early 80s/late 70s, meaning if she lives past that point, the larger check tends to win mathematically.1 But those calculations assume static years with no taxes, no cash flow considerations, and no effect on the rest of the plan. That’s not how retirement actually works. What I’d suggest insteadRun the actual projections for your specific situation. Not a general rule, not a calculator that only looks at one number. A real analysis that accounts for your pension income, your DCP balance, your Roth conversion goals, and what taxes are going to look like across the next 10 to 15 years. The answer for Karen might be 62. It might be 65. It might still be 70. But whatever the answer is, it should come from her specific numbers. Not from a default. Social Security timing is one of those decisions that quietly connects to everything else in retirement: your tax brackets, your Roth conversions, your future RMDs, your Medicare premiums. It all flows together. Getting it right is worth the time to actually look at it. Sources1. Social Security Administration. "Retirement Benefits: When to Start Receiving Retirement Benefits." https://www.ssa.gov/pubs/EN-05-10147.pdf 2. Washington State Department of Retirement Systems. "Deferred Compensation Program." https://www.drs.wa.gov/plan/dcp/ 3. Internal Revenue Service. "Publication 590-B: Distributions from Individual Retirement Arrangements." https://www.irs.gov/publications/p590b 4. Social Security Administration. "Income Taxes and Your Social Security Benefit." https://www.ssa.gov/planners/taxes.html 5. Internal Revenue Service. "Retirement Topics: Required Minimum Distributions." https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-required-minimum-distributions-rmds 6. Centers for Medicare and Medicaid Services. "Medicare Costs." https://www.medicare.gov/basics/costs/medicare-costs The examples and case studies in this article are hypothetical but represent real situations I have encountered in my practice working with Washington State public employees. I read something this past year that has stuck with me. It was a research paper by David Blanchett and Michael Finke. The title is dry. “Retirees Spend Lifetime Income, Not Savings.” But what they found is the kind of thing that quietly changes how you think about retirement. They looked at how actual retirees use their money in real life, and what they noticed was striking. Retirees spend roughly 80% of their lifetime income each year. That includes Social Security, pension benefits, and annuity payments. But they only spend about half of what they could safely take from their savings.1 Half. It shows up across every age group and every income level they studied. The “license to spend” Blanchett and Finke have a phrase for this. They call lifetime income a “license to spend.”1 When money lands in your bank account every month, you spend it. When you have to log into a brokerage account and pull the money out yourself, something different happens. You hesitate. There’s a moment where you wonder if it’s the wrong time, or whether you should wait until the market settles, or whether $40,000 is too much. That hesitation has a real cost in retirement. It shows up as smaller vacations and the trip to see the grandkids that you keep postponing. The research found that married households with $500,000 to $1 million saved often only withdraw about 2% per year.1 That’s roughly half of what the Guyton-Klinger guardrails research considers sustainable for a 65-year-old couple with a balanced portfolio.2 So the question becomes interesting. What kind of retirement do you actually want to live, and what would let you live it? Where the DRS pension comes in Washington State public employees walk into retirement with a head start most Americans don’t have. If you have a PERS, TRS, SERS, or LEOFF pension, that monthly check is doing exactly the kind of work the research describes. It anchors your retirement income. It’s already doing some of what guaranteed income is supposed to do. But here’s the thing. For a lot of the public employees I sit down with, the pension by itself doesn’t quite cover the lifestyle they want. There’s still a gap between what the pension pays and what they want to spend. That gap typically gets filled some combination of the following three options. Personal savings (DCP, IRAs, Roth accounts), part-time work, and Social Security. So when it comes time to claim Social Security, the question is bigger than “what’s my biggest check?” It’s also a question about how much of your monthly income you want coming from a guaranteed source, and when you want it. A hypothetical Take a hypothetical PERS 2 member. Call her Linda. She’s 62 and has $700,000 saved across her DCP and a Roth IRA. The textbook answer says delay Social Security to 70 to maximize her benefit. But Linda’s pension is around $40,000 a year, and her spending need is closer to $80,000. To bridge that gap from 62 to 70, she’d need to pull about $40,000 a year from her savings. That’s a 5 to 6% withdrawal rate. The Guyton-Klinger research suggests that’s on the higher end of what’s sustainable, even with all four of their decision rules in place to manage withdrawals during good and bad markets.2 Linda’s other option is to claim Social Security somewhere between 62 and 70. Her check is smaller, but it covers more of that gap, which means she pulls less from savings while she waits. Is that the optimal answer in a spreadsheet? Probably not. But the research suggests a retiree in Linda’s position is more likely to actually spend her money if the gap between her guaranteed income and her lifestyle is smaller. She might be winning on paper while underspending in real life. What I think this changes I’m not trying to talk anyone out of delaying Social Security. There are good reasons to wait. Longevity is the big one. The surviving spouse benefit matters too. And for some folks, claiming early would actually reduce their flexibility to do Roth conversions in their 60s. But the math-only version of this decision misses what the research is telling us about how retirees actually behave. For Washington State public employees, the DRS pension is already carrying part of that load. The Social Security question is partly about the size of the check and partly about how comfortable you’ll feel spending what you’ve saved. A few things worth doing If you’re sitting in this seat right now, a few practical thoughts. Start with running the numbers in dollar terms instead of percentages. A “95% probability of success” doesn’t tell you much. Knowing your portfolio can sustainably support an extra $1,500 a month tells you something real. It’s also worth looking at how much of your essential spending is covered by your guaranteed income (pension plus Social Security). When that covers most of your needs, the portfolio gets to be the part that funds the fun stuff. Then there’s the Roth conversion piece. Social Security and IRA/DCP distributions are taxed differently at the federal level, and the order you turn each one on can matter more than people realize. And finally, pay attention to how you actually feel about spending from your savings. If pulling money from your IRA/DCP makes you uncomfortable in a way that pension income doesn’t, that’s worth weighing in the decision. It’s information, not a flaw. The textbook answer is a useful starting point. It’s just usually not where the conversation ends. Sources 1. Blanchett, D., & Finke, M. “Retirees Spend Lifetime Income, Not Savings.” Working Paper, December 30, 2024. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=5076626 2. Guyton, J. T., & Klinger, W. J. “Decision Rules and Maximum Initial Withdrawal Rates.” Journal of Financial Planning, March 2006. https://www.financialplanningassociation.org/ -Seth Deal |
Content is for informational purposes only and does not constitute personalized financial or investment advice. Consult with a qualified financial advisor to discuss your individual circumstances before making any financial decisions.
AuthorsBob Deal is a CPA with over 30 years of experience and been a financial planner for 25 years. Archives
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