Ten years out from retirement, most portfolios are still built for growth. That’s usually the right call. You’ve got time, and time is what lets a portfolio recover from a bad year. But somewhere in that stretch between ten years out and five years out, the math quietly changes. You stop having decades to wait out a downturn. You start having a withdrawal date. And a portfolio built purely to grow isn’t automatically built to survive a bad few years. Not right when you need it most. This is the point where it’s worth asking a different question. Not “how do I grow this?” but “how much of this can I afford to lose right now?”
Why the decade before retirement is the riskiest stretch
It has a name in the financial planning world: sequence-of-returns risk. It sounds technical, but the idea is simple. A retirement portfolio doesn’t just care about your average return over 30 years. It cares about the order those returns arrive in. Lose 25% the year before you retire, while you’re still adding money to it, and you still have years of paychecks left to recover. Lose 25% the year after you retire, while you’re pulling money out to live on. Now you’re selling shares at a loss just to cover groceries. That locks in the loss permanently. It also leaves less money behind to ever recover when the market eventually bounces back.
T. Rowe Price has modeled this shift directly. Their research shows a typical “enhanced” retirement glide path: around 77% in stocks ten years before retirement. Five years out, that drops to 65%. By the retirement date, it’s 55%. Five years into retirement, it’s down to 51%. That’s not a sudden move. It’s a steady, planned descent through exactly the years when a bad sequence would hurt the most. Some advisors call this stretch the “retirement red zone.”
Source: T. Rowe Price, “Enhancing the T. Rowe Price Glide Paths” research paper, March 2021 — Enhanced Retirement Glide Path equity allocation by years to/from retirement. Individual target-date funds vary; this illustrates the shape of a typical shift, not a specific fund’s current holdings.
How real target-date funds handle the same shift
You don’t have to build this glide path from scratch. You can see it in the actual funds people already hold. Vanguard’s Target Retirement funds run a stock allocation around 90% at age 25. That eases down to 50% by age 65, and reaches a final landing point of 30% by age 72. Fidelity’s Freedom Index funds show a similar pattern, with more visible detail. As of March 2026, the 2035 fund held about 64% in stocks. That fund sits roughly nine years from its target date. The 2030 fund, about four years out, held about 56%. The fund built for people already retired held closer to 24%, with the rest split between bonds and short-term reserves.
None of these providers make the shift overnight, and neither should you. The point isn’t to sprint from “aggressive” to “safe” the week before you retire. It’s to let the mix drift gradually, so no single bad year catches your whole portfolio exposed at once.
Why “100 minus your age” undersells the problem
You may have heard the old shorthand: subtract your age from 100. That’s roughly how much of your portfolio should sit in stocks. At 60, that’s 40% stocks. At 65, it’s 35%. It’s easy to remember, and it isn’t a terrible starting point. But it treats every 60-year-old the same. It ignores pension income, health, and spending needs. It also ignores how long retirement is likely to last — and that part matters more than the rule assumes.
According to the Social Security Administration’s own actuarial tables, a 65-year-old woman today can expect to live another 20.7 years. A 65-year-old man’s is 18.1 years. That means a big share of retirees are planning for a 20-plus-year retirement. That’s much longer than the decade or so the old rules of thumb were built around. A portfolio that gets too conservative too fast risks running out of growth long before it runs out of years. The real numbers above make the point already. Even five years into retirement, Fidelity and T. Rowe Price both still hold roughly half a portfolio in stocks — not a third.
What “less risky” actually means in practice
Shifting toward preservation doesn’t mean moving everything to cash. It means adding layers that behave differently than stocks do. That way, a stock downturn doesn’t drag your entire plan down with it. A few of the building blocks people use:
Money market funds and high-yield savings hold cash and short-term debt. They’re the most liquid, lowest-drama option — useful for money you might need within a year or two. CDs and Treasury notes lock in a rate for a set period. The national average on a 12-month CD is 1.71%, as of August 2026. Many online banks and credit unions, though, pay meaningfully more than that average. A 5-year Treasury note, backed directly by the U.S. government, recently yielded around 4.37%. On $50,000, that gap is real money. A 12-month CD at the national average pays roughly $855 a year in interest. A 5-year Treasury at 4.37% pays about $2,185. That’s nearly two and a half times as much, for a similar level of safety.
Bond funds versus individual bonds is a genuine trade-off, not a right-or-wrong choice. Individual bonds, held to maturity, return a known amount on a known date. Bond funds spread your money across many issuers and are easier to buy in small amounts. But their value floats with interest rates day to day, unlike an individual bond held to maturity. Charles Schwab’s own investor education material recommends most people use a mix of both, rather than choosing just one.
Stable value funds are common inside 401(k) plans. They hold a bond-like portfolio, plus an insurance “wrap.” That wrap guarantees your balance won’t drop below principal plus accrued interest, even if the underlying bonds lose value on paper. Fixed annuities go a step further, converting savings into a guaranteed stream of income. FINRA’s own investor guidance is candid about the trade-offs, though. Payments typically don’t adjust for inflation, and your money is often locked up, with surrender charges for early withdrawals.
Source: Vanguard, “Constructing return-target portfolios,” October 2023 — average annual returns, 1926–2023. Past performance doesn’t guarantee future results. At these long-run rates, money invested in stocks would roughly double about every 7 years. In bonds, it takes about 13 years — though bonds arrive at that growth far more predictably.
The bucket approach: matching your money to when you’ll need it
One practical way to hold both growth and safety at once is often called the bucket strategy. Financial planner Harold Evensky, along with researchers Shaun Pfeiffer and John Salter, published a version of this idea in 2013. It appeared in the Journal of Financial Planning. Their approach keeps about one year of spending money in cash. That cash gets refilled only from investments that had a gain — never by selling something at a loss. In their modeling, that simple rule improved how often a retirement plan lasted the full 30 years. The gain was as much as six percentage points.
A common variation, described in Morningstar’s research on bucket strategies, uses three buckets instead of two. The first holds one to two years of expenses in cash. The second holds roughly five more years of expenses in bonds, with everything beyond that in stocks for long-term growth. Either way, the logic is the same. You’re never forced to sell your growth investments during a downturn, because your near-term spending is already covered somewhere calmer.
A few ways to start the shift without overreacting
None of this has to happen all at once. And panic-selling after a bad headline is its own kind of risk.
- Start with your timeline, not the calendar. “10 years out” and “5 years out” are useful markers. But your actual withdrawal date matters more than your birthday. So does whether you have a pension or other guaranteed income.
- Shift gradually, on a schedule. Moving 3 to 5 percentage points from stocks to bonds each year avoids trying to time a single “perfect” moment. Nobody can reliably do that anyway.
- Build your near-term bucket first. Cover one to two years of expected spending in cash or a money market fund. Worry about the rest of the portfolio’s mix after that.
- Compare actual rates before choosing a preservation tool. National averages on CDs and savings accounts are often far below what a top online bank or credit union pays. It’s worth checking current rates yourself, rather than assuming the average is the best you can do.
- Get a second opinion before buying an annuity. Fixed annuities can solve a real problem: guaranteed income. But the fees, surrender periods, and inflation exposure vary widely by contract. A fee-only fiduciary advisor with no commission on the sale can help you see the trade-offs clearly.
The bottom line
The ten years before retirement aren’t the time to panic and go all to cash. They also aren’t the time to keep the same aggressive mix you held at 35. The real shift is gradual — a little less stock exposure each year. A little more of your portfolio does calmer, more predictable work instead. Getting this right matters most for the part of your plan that’s easiest to overlook. That’s how much you owe versus how much you own. If you haven’t already, our guide to paying off debt before retirement walks through the other half of that balance sheet. It explains why high-rate debt deserves urgency that a low-rate mortgage doesn’t.