Safe Money
Protecting Your Retirement Savings
"Safe money" is the portion of your savings you can't afford to lose to a market downturn — the money that needs to be there when you need it, not just when the market cooperates.
Why market risk matters more in retirement
While you're working and adding to your savings, market downturns can be uncomfortable but recoverable — you have time, and you're not withdrawing from the account. In retirement, that equation changes. Once you start taking regular withdrawals from an account that has also dropped in value, the math becomes much less forgiving.
What is sequence of returns risk?
Sequence of returns risk is the risk that the order in which you experience investment gains and losses — not just the average return over time — can permanently affect how long your money lasts. If a significant market downturn happens early in retirement, at the same time you're withdrawing income, you're forced to sell more shares at lower prices to generate the same income. That leaves fewer shares left to benefit when the market eventually recovers. Two retirees can experience the exact same average annual return over 20 years and end up with very different outcomes, simply because of when the down years happened relative to when withdrawals began.
Why this matters for your plan
Because sequence of returns risk is about timing, not just long-term averages, it's difficult to plan around using market-based accounts alone. This is one of the main reasons many retirees choose to keep a portion of their savings in vehicles that aren't directly exposed to market losses — so that a downturn in the first few years of retirement doesn't permanently damage their ability to generate income for the rest of their life.
How safe money strategies fit in
A safe money strategy generally means dividing your retirement savings so that some funds stay invested for long-term growth, while a portion is protected from market loss and positioned to cover near-term income needs. Tools like fixed indexed annuities are often used as part of this approach because they offer principal protection with the opportunity for growth. Learn more about how these products work on ourFixed Indexed Annuities page, or see how they can be used to build guaranteed income on our Lifetime Income Planning page.
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