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I used AI as an editorial assistant to help organize and refine my thoughts; the underlying ideas and personal experiences remain my own.
Like a lot of engineers, I spent my career solving problems the same way: build a model, gather the data, run the simulations, optimize the result. So when retirement came into view, I did what came naturally. I built spreadsheets—and got back a mountain of output and almost no peace of mind.
The problem, I eventually realized, wasn’t the math. It was the question. Most retirement planning revolves around one anxious query: Will I run out of money? For people who saved diligently, that usually isn’t the real issue. The real issue is quieter: How much of what I’ve saved can I actually spend without worrying about everything that might go wrong?
Things improved only when I stopped treating retirement as one big portfolio problem and split it into two. The first is paying for the essentials—housing, food, healthcare, insurance, and the bills that come due no matter what the market does. The second is funding everything else: travel, hobbies, gifts, and the experiences that make retirement enjoyable.
For the essentials, I stopped focusing on expected returns and started focusing on certainty. Social Security became the cornerstone. On top of that, I built a ladder of Treasury Inflation-Protected Securities (TIPS), with maturities aligned to future spending needs. Together they create a floor of inflation-adjusted income largely insulated from both inflation and market declines.
I arrived at this approach through the work of Zvi Bodie and William Bernstein. Bodie argued that retirement planning should begin by securing essential spending. Bernstein called it a liability-matching portfolio: first match essential future liabilities with safe assets such as TIPS, Social Security, and perhaps an annuity. Only then worry about investing the rest.
What surprised me was what happened next. Once the floor was in place, everything above it became easier to think about. Bernstein calls it the Risk Portfolio—the assets beyond what is needed to fund essential spending. Because those assets were no longer responsible for keeping the lights on, I could view them differently. They became a source of lifestyle spending, family support, and legacy rather than a safeguard against catastrophe.
The question I asked changed as well. Instead of asking, “What is my probability of success?” I started asking, “What level of spending can this portfolio support under a range of future outcomes?” That led me to the work of Jonathan Guyton, William Klinger, Wade Pfau, and Michael Kitces. While their approaches differ, they share a common idea: retirement spending does not have to be fixed forever.
The final piece came from Wade Pfau’s writing on retirement income and pension-style thinking. Pension plans focus on funded status—assets relative to liabilities. The question stops being, “Is my portfolio big enough?” and becomes, “Is it sufficient for what I’m asking it to do?”
That distinction changed everything for me. The breakthrough wasn’t when a spreadsheet showed I could retire. It was when I realized my essential expenses were effectively covered regardless of what the stock market did next year. Retirement stopped feeling like a financial problem and started feeling like a life problem.
The lesson that took me the longest to accept was that retirement planning was never really an optimization problem. It was a confidence problem. The solution wasn’t a better spreadsheet or one more Monte Carlo simulation. It was a framework that separated needs from wants, protected the needs with dependable income, and allowed the remaining assets to support the life I wanted to live.
Retirement planning, it turned out, had less to do with predicting markets and more to do with defining enough.
For me, “enough” is both a portfolio number and a spending mindset. I have a target portfolio value that I believe can support our desired lifestyle, but I also recognize that retirement won’t unfold exactly as planned.
That’s why I plan to use a simple Green-Yellow-Red system. If markets perform well, we spend as planned. If they don’t, we’re willing to reduce discretionary spending until things recover.
In other words, “enough” isn’t just having enough assets—it’s also having the flexibility to adapt when necessary.
How do you define “essential expenses” and would life be a joy living on that only and would it cover unexpected essentials?
It’s highly personal IMO.
My essential expenses include taxes, insurance premiums, prescriptions, HOA fees, utilities, groceries, preventive healthcare, and even a modest amount of travel and entertainment, especially in my 60s.
I hope my risk portfolio will fund the rest of my lifestyle spending—the “joy” category—but I’d rather reduce that discretionary spending during market stress than compromise my essential expenses or become a burden to my children.
How many years does your essential spending “floor” cover?
I am lucky enough to be able to afford 25 years of essential spending.
Excellent article. I found a way to answer that question by watching my monthy and annual “flow” and adjusting as necessary.
I am lucky enough to have some fairly large RMDs now, and my budget leaves me with something extra at the end of each month. I am finding that I have a new question. It is: “What can I now afford to give to the institutions that gave me the perspectives, values, education and skills I needed to succeed?” I am grateful, and the need to show that gratitude tugs at me.
And I am not just thinking of my college and law school, but older and smaller entities, like my Catholic grammar and high school, local public library, church, not-for-profit community organizations and the like. I’ll never be able to thank the individuals I would like to honor, since they are mostly all gone. But these formative entities soldier on with new students, participants and members like me, and I think they deserve a share of what I’ve earned.
Thanks Mark, another great article. Enough said, the key word.
Mark, love this article, particularly the line “Once the floor was in place, everything above it became easier to think about.” As a person without a pension, I decided to create my own pension by setting up a customized-for-me TIPS ladder in 2024. I wrote about the pros and cons of that decision in “Laying Down a Floor” in 2024. For me, the biggest pro remains clearing out the psychic space to deal with all the other things that come up in retirement besides the money.
I think too many of us focus on asset accumulation, returns and spending in retirement. These are very important, but other areas are also very important such as healthcare, estate planning, tax strategy, where to live in retirement and others. These are all important and need to be considered in a good retirement plan.
Mark, this resonated with me. Like many retirees, I spent years focused on accumulation and optimization. Yet the older I get, the more I realize that retirement isn’t primarily a math problem. It’s a confidence problem.
Jonathan’s terminal diagnosis drove that lesson home. We can spend decades calculating probabilities, break-even points, and withdrawal rates, only to discover that life doesn’t always cooperate with our assumptions. At some point, the question shifts from “How much can I safely preserve?” to “What is this money meant to do for me?”
I especially liked your distinction between funding necessities and funding the life we want to live. Once the essentials are covered, the conversation changes. Retirement becomes less about maximizing wealth and more about maximizing the years we have left to enjoy it.
In the end, defining enough may be the most important financial calculation we ever make—and one that no spreadsheet can fully answer.
Mark, I took a similar approach going into retirement, though over a shorter time horizon. I liability-matched both my essential expenses and discretionary spending. For the essentials, I bought a ten-year term annuity; for the discretionary spending, I built a ten-year inflation-protected bond ladder that gradually winds down. The trick, of course, is knowing what your “enough” looks like — but once you have that clarity, it gives real peace of mind and takes a lot of the emotion out of managing the portfolio.