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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 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
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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
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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
July 2026
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