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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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