How Much Safe Money Should You Have in Retirement?

Let me ask you something…

If the market dropped 20% next year…
would your retirement still work?

Would you worry about how long you’re going to live?

Or would you have to start making adjustments?

This is the part about retirement most people were never taught.

Retirement isn’t just about how much money you have.
It’s about how much of your income is protected.

That’s what “safe money” really is.

The Question Most People Ask (And Why It’s Wrong)

After working with hundreds of clients, I hear this question all the time:

“How much should I put into annuities or whole life?”

But that’s not the right place to start.

A better question is:

How much of my retirement income do I want protected — no matter what the market does or how long I live?

Because once you answer that, the allocation becomes much clearer.

The 3 Risks That Shape Every Retirement Plan

Most people underestimate the three biggest risks in retirement:

1. Longevity Risk

You may live much longer than expected — 25, 30, even 35+ years.

2. Market Volatility

Your portfolio will experience unpredictable swings over time.

3. Sequence of Returns Risk

Losses early in retirement — combined with withdrawals — can permanently damage your portfolio.

And here’s the challenge:

These risks don’t show up randomly.

They show up right when you start relying on your money.

The Biggest Risk Right Now: Sequence Risk

Sequence risk is one of the most important — and most misunderstood — risks in retirement.

If the market drops early in retirement…

And you’re pulling income at the same time…

You’re locking in losses.

And unlike when you’re younger, you don’t have time to recover.

That’s why I say:

It’s not bad averages that ruin retirements.
It’s bad timing.

The Big Risk Long-Term: Longevity

Now let’s layer in longevity risk.

You could easily spend 25–30+ years in retirement.

In fact, for a healthy 65-year-old couple, there’s a significant chance one spouse lives into their 90s.

That’s a long time for your money to last.

The real danger isn’t just market loss…

It’s running out of income later in life — when you have fewer options to adjust.

And here’s the key:

Longevity risk amplifies every other risk.

What the Research Shows

This isn’t just theory — it’s supported by research.

• The Society of Actuaries shows retirees’ top fear is running out of money
• Morningstar suggests safe withdrawal rates may be closer to 3%–3.5%
• BlackRock found retirees with guaranteed income feel more confident and spend more comfortably
• The American College highlights income flooring as a key strategy
• Wade Pfau’s research shows allocating 20–40% to guaranteed income can improve outcomes

When you look at all of this together, the message is clear:

Reducing risk matters just as much — if not more — than chasing returns.

What Safe Money Actually Looks Like

In real life, here’s what I typically see:

• 20%–40% allocated to income annuities
• Additional assets in MYGAs or FIAs for protected growth
• Whole life used for liquidity and volatility buffering

That last piece is important.

Having access to liquidity — like cash value — allows you to avoid selling investments during downturns.

It gives your portfolio time to recover.

Why 30%–60% Safe Money Is Common

When you combine these strategies…

It’s very common to see:

30%–60% of a portfolio in safe money.

And this isn’t random.

It’s intentional.

Safe money is designed to:

• Cover essential income
• Reduce sequence risk
• Provide stability during market volatility

The 3-Bucket Strategy

A simple way to think about this is through three buckets:

Income Floor

Social Security, pensions, and annuities
→ Your guaranteed baseline income

Safe Money

Annuities, whole life, protected assets
→ Protection, liquidity, and flexibility

Growth

Market investments
→ Long-term growth and inflation hedge

When these are structured properly, you create:

Clarity, protection, and long-term confidence.

A Simple Rule of Thumb

For many retirees:

• 50%–80% of essential expenses should be covered by guaranteed income
• This often results in 20%–60% of the portfolio in safe money

The rest can remain in growth-oriented investments.

This balance allows you to participate in the market…

Without being dependent on it.

What Safe Money Is (And What It’s Not)

Safe money is not about chasing returns.

It’s about:

• Protecting your income
• Reducing sequence risk
• Giving your investments time to recover

When done correctly, it also helps protect against longevity risk.

The Bottom Line

It’s not about choosing between growth and safety.

It’s about making sure your retirement works…

Even when the market doesn't.

And even if you live longer than expected.

Ready to Retire Financially Relaxed?

My goal is to help you eliminate the fear of running out of money, avoid costly mistakes, and retire with confidence and security. When you have safe, predictable income in place, you’re free to actually enjoy retirement — not just worry your way through it.

👉 Learn more at the Retirement Income School™.
📞 Want to talk? Schedule a Retirement Income Q&A Call — let's get a plan in place for you!

DISCLAIMER:
The information in this lesson is provided for general educational purposes only and does not constitute financial, legal, or tax advice. Retirement Income School™ and Dr. Amanda Barrientez do not provide individual investment recommendations. Always consult with a licensed advisor or tax professional before implementing any strategy discussed.