Chasing a Perfect Retirement Plan

There’s a particular kind of pilot who has done everything right, and I suspect one comes to mind.

They maxed the plan for twenty-five years, ran the numbers more times than they can count, and probably built a homemade spreadsheet with more tabs than some operations manuals. The projection says retirement is comfortably within reach. Yet every time the decision gets close enough to feel real, another reason appears to fly one more year.

“The market has been choppy lately,” or “the next contract might improve things,” or “I’d just feel better seeing the number a little higher.” Each reason is sensible on its own. Together, they can add up to a career that ends when the FAA says it must rather than when you decide it should. There is nothing wrong with flying until mandatory retirement age. The point is to make that choice intentionally. If you do not define your “enough,” it will define itself.

Over time, I’ve come to see this pattern across industries. Ironically, the sticking point usually has less to do with the math than with beliefs, experiences, expectations, and behavior.

That is why the retirement question is not simply; Can I afford to stop flying? It is also; What would make me comfortable enough to believe the answer? An effective plan has to address both sides: the mechanics of creating retirement income and the psychology of trusting that income once the paycheck stops.

Caution in Retirement is Rational

This is not a critique of people who double-check their seatbelt or triple-check their weight and balance calculations. A healthy bias toward caution is part of what keeps us alive. Retirement has real risks that show up at different stages, and we rarely know exactly when, how, or how much they will matter. However, we can control the structure we build around those unknowns.

Consider sequence-of-returns risk. Imagine two retirees each start with $1M, withdraw $45,000 in the first year, and increase that withdrawal by 3% each year after. Additionally, imagine both experience the exact same 30 years of S&P 500 returns, averaging just under 12% annually, but they experience them in the opposite order.

	Bad years arrive first (1966-1995)	Good years arrive first (same years, in reverse order)
Average annual return	~11.8%	~11.8%
Ending balance	~$2.9M	~$11.8M

Hypothetical illustration applying historical S&P 500 total returns with dividends reinvested (1966 – 1995), applied in original and reverse order. Not a projection or guarantee of any actual investment’s performance.

Neither retiree ran out of money, and both earned the same average return, yet one finished with roughly four times the other. The retiree who met the bad years first spent the early stretch selling into weak markets, which permanently shrank the base that later gains could compound on. That is Sequence of Returns Risk, and it is why the first years after your last flight can carry more weight than the years that follow. You can plan around it, but you cannot control it, and trying to eliminate its effect entirely is a fool’s errand.

How do you define “Success” vs. the models you depend on?

If you run your numbers through most planning software, it will spit out a probability of success. It may be tempting to fixate on that figure and delay the decision to begin withdrawals from the portfolio until it reads closer to 100%. However, the absence of a decision in this case, is your decision.

What that number rarely makes obvious is that “success” in many models simply means dying with at least one dollar left. A plan showing a 100% success rate may mean you are leaving too much life on the table. It is easy to stay in accumulation mode if you have not first defined what “enough” looks like in retirement. That definition should be tied directly to the lifestyle you want and supported by careful planning.

I believe pilots understand this tradeoff better than most people. Tankering extra fuel can make sense, but it also comes at a cost: the added weight increases burn and can eat into payload. We carry reserves because they are prudent, but stop short of filling every tank to the brim. A retirement plan engineered for zero possibility of failure is like a flight that never departs. It is optimized for one thing, but not the other.

The deeper issue is that a plan optimized to 100% tends to be rigid. It assumes you will never adjust anything, never trim a vacation in a market downturn, and never find flexibility anywhere. That is a strange assumption for someone who has spent an entire career adapting in real time. When the weather changes, you adjust your course or re-plan without much drama. Adaptability is a real asset!

Three Questions Any Withdrawal Plan Should Account For

With that framing in place, the mechanics become easier to organize. A withdrawal plan ideally answers the following three practical questions: what system moves money into your spending account, how much you take and whether that amount can flex, and which accounts you draw from first.

Question One: Which System?

Four approaches come up repeatedly, and I’d encourage you to judge each one less on its elegance than on a blunter question, which is whether you could hold it together during a decade that looks like the left-hand column above.

Simply put, the right withdrawal system for you is not the one that looks best on paper. Rather, it is the one your household can understand, trust, and continue following when the market makes it uncomfortable.

Bucket Approach

The bucket approach divides your money by time horizon, with cash for the near term, bonds for a buffer, and equities for the long haul. Estrada (2019) tested bucket strategies against simply rebalancing a fixed allocation, using data from 21 countries over more than a century, and found that buckets tended to come out behind. However, they may let you continue to spend while the market is down.

Income Floor Strategy

The income floor covers your essential expenses, or some other pre-determined amount, with guaranteed income. This can free assets above that line to take on more of the risk. Pfau (2019) calls this the safety-first framework, and it starts by asking how much income you need every month regardless of what markets are doing. The floor does not have to be an annuity. A bond or TIPS ladder maturing alongside your spending can do similar work with more flexibility.

Total Return Approach

Total return manages everything as a single pool and sells whatever is needed to rebalance in line with your desired allocation. The research generally supports it as the most mathematically efficient option available. It may also require you to sell equities for living expenses in the middle of a crash.

Income Only Strategy

Income only is associated with living on dividends and interest without touching principal, and I understand the appeal completely. One risk, and Kitces makes this case thoroughly, is what can happen if the yield falls short of your spending. It may be tempting to reach for higher yields, which often means concentrating into a narrower set of sectors and ending up with a portfolio that is not as diversified as intended.

Question Two: How Much, and Can it Shift?

Bengen (1994) introduced the 4% rule. The idea is that you withdraw 4% of your portfolio in the first year of retirement, adjust that dollar amount for inflation each year after, and history suggests the money should last at least 30 years. It remains a solid building block for conversation but should not be the end of one. Some researchers argue that current valuations justify something closer to 3.5%, while others are more optimistic about structural changes in how companies return capital. There’s not a settled, “right” answer.

Guardrails interest me more than the starting percentage does. Guyton and Klinger (2006) formalized the approach, where you set an initial withdrawal rate and then define in advance what happens if the portfolio climbs past one threshold or falls below another, allowing your spending to flex within those bands.

Guardrails help convert your flexibility into a written rule, which allows the model to give you credit for the adaptability you already have. Therefore, you no longer need a plan that survives every conceivable scenario without adjustment. Blanchett, Kowara, and Chen (2012) compared withdrawal strategies and found that approaches which adjust along the way tend to use retirement assets more efficiently than a fixed, inflation-adjusted withdrawal.

They also let you make the hard decisions while you’re calm rather than mid-drawdown when your judgment may be compromised.

Question Three: In What Order?

The order in which retirement assets are spent can have a significant impact on lifetime taxes. A common rule of thumb is to spend taxable accounts first, then pre-tax retirement accounts, and preserve Roth assets for last. The goal is to give tax-deferred and tax-free assets more time to grow.

But the best sequence is not always that simple. Airline pilots often accumulate large balances in pre-tax retirement accounts during their working years. If those accounts are left untouched until required minimum distributions begin, the resulting withdrawals can push more income into higher tax brackets and overlap with Social Security benefits.

Because a pilot’s retirement date is usually known years in advance, the period between retirement and the start of required minimum distributions creates a planning opportunity. Rather than automatically spending taxable assets first, some retirees may choose to draw from pre-tax accounts or complete Roth conversions during these lower-income “bridge years.” The goal is to smooth taxable income over time and reduce the risk of larger tax bills later.

What Matters?

Ultimately, a successful withdrawal system comes down to whether you understand it well enough to explain it to the person who shares the consequences with you, whether you sleep at night, whether you can keep following it through a downturn instead of abandoning it, and whether it lets you spend money without guilt when the plan says you can.

Why We Keep Saying One More Year

Accumulating is comfortable largely because it does not always have an endpoint. There is always a higher number available, the scoreboard only moves in one direction, the feedback is pleasant, and it reflects habits that took decades to build.

Drawing down asks something entirely different of you, because it requires looking directly at the fact that this phase is finite, the balance will decline, and eventually you’re finite too. That’s genuinely uncomfortable, and I don’t think people avoid it because they’re irrational, but because it is difficult to face.

Therefore, discomfort finds itself a socially acceptable outlet, and it comes out as one more year, one more percentage point of success probability, or a slightly bigger cushion. Every one of those is defensible on its own terms.

To help with this, I like reframing this phase as a transition rather than a depletion. The idea is that you are trading money for time and experiences and the life that all those years of flying were funding in the first place. Depletion keeps your eyes fixed on what’s leaving, while transition points at what you’re getting. Half empty, or half full?

Build Something Worth Retiring Into

The other reason one more year feels so easy is that a lot of people arrive at retirement with a detailed financial plan and no plan whatsoever for how they will spend their days.

Spending in retirement is rarely flat, and practitioners often describe it in terms of go-go, slow-go, and no-go years. Blanchett (2014) documented that real spending tends to decline through much of retirement before rising again with healthcare costs late in life, which means the years when you’re most able to travel, chase grandkids, and finally do the thing you’ve been putting off are the earlier ones.

Some questions worth pondering well before you get there:

• What does your ideal retirement day look like, where are you, and who is with you?
• What are you doing now that you don’t want to carry into retirement?
• What have you been putting off that you want to start?
• What would you need to build over the next five years so that something is actually waiting for you?

Friendships, projects, and a sense of purpose all take time to develop, and they’re considerably harder to assemble from a standing start at 65 than to grow into gradually while you’re still flying.

Define Your Enough Before You Chase Someone Else

The strategy that outperforms in the backtest, and the strategy you’ll still be using a decade from now aren’t always the same strategy.

Pick a system you understand, set your guardrails while you’re calm, don’t discount your ability to flex as needed, and define the purpose of each dollar.

How do you define enough? I do not have a clean answer, but I have observed that people who wrestle with the question tend to make better decisions about everything downstream of it. They understand what the machinery is in service of.

Fly safe!