5.4 From Growth to Preservation: Seamless Portfolio Shifts as You Near Freedom
As you approach your escape date, how do you ensure that a market crash doesn't decimate your portfolio's value just before you need to draw from it?
Need the full picture? See the escape map here
Landing a plane is harder than flying it
They say landing a plane is much harder than taking off and cruising.
According to pilot Stan Greenspan, 75% of a pilot’s training is spent practicing landings1. They simulate all kinds of challenges — crosswinds, snow, engine failure over cities or forests — until they can safely land under any conditions, even on autopilot.
Why? Because the stakes are highest during landing: one mistake can lead to massive loss of life, reputational damage, and financial ruin.
And if pilots spend that much time preparing to land — then we should spend at least some time thinking about how to land our finances safely, too.
After all, you’re nearing your destination. The runway is in sight.
Let’s make sure you don’t crash just before you arrive.
Sequencing Risk - The main danger to your wealth
Sequencing risk is when your assets fall in value right when you need to sell them.
It’s a double blow:
Your investments are down
But your living costs keep rising — thanks to the inflation trap
Picture this:
You’re all-in on equities, and have a portfolio of £1m.
On the 4% rule, that allows you to live off £40,000 per year, every year, for life.
Then, 6 months before you retire, the market crashes 40%.
You now only have £600k, and your income is reduced to £24k, scuppering your retirement plans.
Now what?
You either:
Sell at a painful loss
Or delay your freedom and wait (possibly years) for a recovery
Or imagine you’ve got a big expense coming — a wedding, major home repair, healthcare costs — and the assets you were counting on to pay for it suddenly drop in value. Plans cancelled.
That’s sequencing risk — and it’s one of the biggest financial threats to people nearing retirement or financial freedom.
Fortunately, there are several ways to protect yourself from this, and land your plane safely, whatever crosswinds or engine failures you may encounter.
Let’s look at four of them. I’ll then disclose which one I am going to pick.
1. Target Date Funds: Set It and (Mostly) Forget It
Target Date Funds (TDFs) are popular index-based portfolios with a built-in “retirement date.”
As that date approaches, the fund gradually de-risks — shifting from higher-volatility assets like equities to lower-volatility ones like bonds and money market instruments.
You don’t need to think about asset allocation or timing — the fund handles it for you. By the time you reach your escape date, the portfolio is designed to be more stable, having weathered market turbulence along the way.
Naming Conventions
The fund’s name usually includes a year close to your retirement or escape date — ideally within 5 years.
Example: Vanguard Target Retirement 2045 Fund
Pros
Set-it-and-forget-it: Minimal decision-making required
Smooth de-risking: Automatically reduces volatility as you approach retirement
Good for hands-off investors: Especially those without time or interest in DIY management
Possible Cons
Overly conservative: Some funds shift out of equities too early, potentially sacrificing long-term growth
One-size-fits-all: Doesn’t account for your individual risk appetite, income sources, or flexibility
Costs: Slightly higher fees (~0.2% annually) than pure index funds due to active glidepath management
Withdrawal-phase blind spot: Many TDFs are designed to "land" at retirement, but not built for sustainable drawdown.
Your assets may not grow faster than inflation at this stage, and without continued growth, the risk of depleting your pot too soon increases.
Target Date Funds - Conclusion
Target Date Funds offer a simple, structured approach to investing — especially useful for those who want peace of mind as they approach financial freedom.
But they may not be ideal if you:
Want more growth in later life
Plan to work part-time or semi-retire
Need to actively manage your risk and withdrawals
2. Manual Reallocation: Taking the Wheel
If Target Date Funds are like autopilot, then manual reallocation is you taking full control of the cockpit.
Rather than relying on a fund to gradually shift your investments from riskier assets (like equities) to more stable ones (like bonds or cash), you make those moves yourself — on your terms, and on your timeline.
Why Do It Manually?
Manual reallocation gives you flexibility and precision. You can adjust based on:
Market conditions
Your personal risk tolerance
Upcoming life events or large expenses
How close you are to your escape date
It also allows you to customise your glidepath, instead of relying on a one-size-fits-all model like a Target Date Fund.
The Glidepath: Example Transitions
One simple manual strategy is to gradually shift your equity exposure downward as your escape date approaches:
80/20 (Equities/Bonds) – 10+ years from your target
60/40 – Around 5 years away
40/60 – Final 1–2 years before you begin drawing from your assets
You could even use the allocations in Post 3.12, and switch between
All in Equities
60-40
Wealth Preserver
as you get closer to needing the money.
These aren’t hard rules — think of them as markers, like altitude checks on a landing approach. You adjust as you descend.
Pros
More Control – You choose when and how much to shift, based on your real-life situation and confidence in the market.
Custom Glidepath – Tailor your asset mix to suit your actual risk tolerance, not a generic model.
Flexibility – React to personal changes (like a big expense or unexpected income) as they happen.
Potential for Higher Growth – If you delay de-risking slightly, you may capture more market upside.
Lower Cost – Using basic index funds yourself can be cheaper than paying for a Target Date Fund with built-in management.
Possible Cons
Requires Discipline – You have to follow through on your plan — especially when markets are turbulent.
Not Set-and-Forget – Needs regular check-ins and rebalancing, which may not suit hands-off investors.
Timing Risk – The temptation to time the market can creep in — and often backfires.
Complexity – Requires more knowledge and attention, especially as you near your escape date.
Platform Fees or Taxes – Some platforms may charge for switching funds, and outside of ISAs/SIPPs, you could trigger capital gains taxes.
Conclusion
Manual reallocation isn’t for everyone — but if you want more control, or feel a Target Date Fund is too rigid or conservative, this can be a smart middle path.
You’re still landing the plane — you’re just choosing to do it with your hands firmly on the controls.
3. Buckets: Segmenting for Peace of Mind
If manual reallocation is about adjusting your whole portfolio gradually over time, the bucket strategy is about mentally and financially separating your money into distinct "pots", each with a specific job to do.
This method doesn't just manage your risk — it helps manage your stress.
How the Bucket Strategy Works
You divide your portfolio into three buckets, each aligned to a different time horizon:
Bucket 1: Cash and Near-Term Needs (0-2 years)
This covers your upcoming living expenses
Typically held in cash or near-cash equivalents (e.g. money market funds)
Its job is stability and liquidity, not growth
Bucket 2: Medium-Term (3-6 years)
Held in low- to moderate-volatility assets, such as short- or intermediate-term bonds
Designed to refill Bucket 1 as needed
Offers a balance between safety and some income/growth
Bucket 3: Long-Term Growth (7+ years)
Equities and other growth assets
This bucket can ride out market cycles, recover from crashes, and generate long-term returns
Its job is to grow, not to be touched until later
Example Bucket Portfolio
Let’s say you have £1 million in assets and plan to spend £40,000 per year.
Here’s how you might split it using the bucket strategy:
Bucket 1: Short-Term (0-2 years)
£80,000 – Cash or money market funds to cover the next 2 years of expensesBucket 2: Medium-Term (3–7 years)
£200,000 – Short-term bonds or conservative funds to refill Bucket 1 over timeBucket 3: Long-Term (7+ years)
£720,000 – Global equities and growth assets to beat inflation and grow your wealth
When to Set Up a Bucket Strategy?
5–7 years before your escape date is a smart window to start setting it up. Here's why:
7 years out:
You can begin gradually building up Buckets 1 and 2 while markets are still in “growth mode.”
This gives you flexibility to fill those buckets opportunistically — when markets are strong.5 years out:
If you haven’t started yet, now’s the time. Begin de-risking some of your equities, shifting gains into safer assets to fill Buckets 1 and 2.
You’ll want to have your full 7 years of expenses ring-fenced before your actual retirement or escape date.
Pros
Helps manage sequencing risk by giving you a cash cushion
Clear mental framework for managing different types of money
Reduces stress during market downturns — you know your short-term needs are covered
Aligns with real life — people tend to spend money in stages, not all at once
Easy to explain to partners or family — makes your strategy feel more concrete
Possible Cons
Can be complex to set up and manage across multiple accounts or funds
May require periodic rebalancing — topping up Bucket 1 from Bucket 2 or 3
Over-reliance on cash could lead to missed growth if it’s too large
Somewhat subjective — deciding how much to allocate to each bucket depends on your lifestyle, risk tolerance, and timeline
Conclusion
The bucket strategy is ideal for those who want clarity and calm as they transition from building wealth to living off it. It's not about chasing returns — it's about knowing what each part of your portfolio is for, and when you'll need it.
Think of it as the emergency checklist and fuel gauge in your cockpit — tools that keep you calm and clear-headed, even when the sky gets rough.
4. Cash Buffer: Your Crash-Resistant Cushion
Sometimes, the simplest tools are the most powerful.
A cash buffer is exactly what it sounds like: a stash of cash set aside to cover your living expenses during a market crash. It’s a straightforward way to avoid selling investments at a loss — and gives you breathing space to wait for recovery.
How It Works
You set aside 1-5 years worth of expenses in cash or near-cash assets.
This buffer is separate from your core portfolio and acts as a financial shock absorber.
If the market tanks, you draw from this buffer instead of selling equities.
Example
Let’s say you spend £40,000 per year.
A 5 year cash buffer = £200,000 in a high-yield savings account or money market fund.
If markets drop 30%, you don’t touch your investments — you live off your buffer while they recover.
When markets recover, then you replenish your cash buffer, and live off equities as they grow.
Pros of a Cash Buffer
Reduces panic – You avoid selling during downturns
Quick access – Immediate liquidity for emergencies or big expenses
Simple to manage – No complex reallocation or rebalancing needed
Works well with other strategies – Can be used alongside buckets or reallocation
Possible Cons
Cash loses value to inflation – Especially if held too long
Opportunity cost – Money in cash isn’t growing
Not a full strategy on its own – Works best as part of a broader plan
Conclusion
A cash buffer is your emergency parachute — not flashy, but incredibly effective when things go wrong.
If you’re close to your escape date and want one simple way to reduce risk, this might be it.
How I Plan to Land my Plane
My current thinking, aged 42, is to use a 3 year cash buffer strategy. It’s simple, and allows most of my wealth to grow in a global index fund.
A recent study (Anarkulova, Cederburg, O’Doherty, 2025)2 challenges the traditional advice that you need to shift into bonds for safety as you approach retirement.
They found that a 100% equity portfolio (33% domestic, 67% international) — when paired with a short-term cash buffer at retirement — actually performed better than traditional stock-bond mixes in nearly every scenario:
More long-term growth
Lower risk of portfolio ruin
Higher average retirement income
More wealth left behind
The key?
At retirement, they briefly held up to 27% in cash-like assets (short-term bills) — not bonds — to shield against sequencing risk. Within a few years, they returned to full equity.
At age 42, this strategy works for me. I’m comfortable staying mostly in equities, using a cash buffer to protect against short-term shocks.
But that might change as I get older.
And your risk appetite could be very different from mine.
The key point is this:
Some level of de-risking as you approach your escape date is the general wisdom.
Whether that’s through a cash buffer, bonds, or a bucket system — pick something that feels right for you.
It’s not about the “perfect” strategy.
It’s about having a plan you’ll stick to — especially when the market gets bumpy.
Recap
As you approach your escape date, some de-risking is usually wise. Here are four ways to do it — each with pros and trade-offs:
🎯 Target Date Funds – Great for simplicity and automation, but might de-risk too soon.
✋ Manual Reallocation – Gives you control, but requires discipline and regular tweaks.
🪣 Buckets – Matches your money to your timeframes; clear, comforting, and practical.
💵 Cash Buffer – Easy to understand and execute; shields you during market drops.
There’s no one-size-fits-all answer — just what works for you. The important thing is to have a plan you’ll stick to when things get rough.
Up Next: Life Insurance
Protect Your Assets — And Make Sure Your Family Never Falls Back Into the Trap
https://slate.com/human-interest/2017/03/how-much-of-a-pilots-training-is-emergency-landing-practices.html
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=459040
Disclaimer: This content is for informational and educational purposes only. It does not constitute personal financial advice. Everyone’s situation is different — if in doubt, speak to a qualified, regulated financial adviser.