Hedge Your Retirement Now with Options, Not Bets

What pros wish every retiree knew about hedging

Look, options in retirement are not lottery tickets. They’re insurance. The point isn’t to “hit it big,” it’s to make sure a bad quarter doesn’t force you to sell stocks at the worst moment just to fund next month’s grocery run. Think of puts and collars as the umbrella you buy when the sky looks perfectly fine, because the best time to get protection is before everyone else realizes it’s raining. And yes, I’m saying now, while markets are still functioning, spreads are tight, and volatility isn’t screaming.

Here’s the thing: hedges are about smoothing the ride and protecting withdrawals, not juicing returns. If you’re drawing 3-5% a year, avoiding a deep drawdown early in retirement matters more than squeezing out an extra 50 bps in a good year. That’s the sequence-of-returns problem in plain English. A 20% drop is survivable; having to sell into that drop to fund living expenses is what actually hurts. Actually, let me rephrase that: it’s not the drop that breaks plans, it’s the forced selling during the drop.

Every hedge has a cost. You pay premiums or give up some upside. The art is paying less than the pain you avoid. You know, like agreeing to a $1,200 annual insurance bill to avoid a $50,000 roof repair. In options terms, that might mean budgeting 1%-2% of portfolio value per year for protective puts or collars when volatility is fair. When volatility spikes, insurance gets expensive, so, again, buy it before you need it.

Keep it simple. Rules-based beats fancy in retirement. You don’t need exotic structures with ten legs and Greek letters spilling everywhere. A basic playbook works: modest protective puts, put spreads to trim cost, or a conservative collar (long put, short call) on a portion of your equity exposure. Rinse and repeat on a schedule, not on a hunch. I’ve seen too many retirees try to outsmart the tape and end up with a mess of positions they don’t want and can’t easily unwind.

Liquidity and execution matter, big time. Use liquid indexes and ETFs (SPX/SPY, QQQ, IWM), not quirky one-off names with 40-cent-wide spreads. Trade near the middle of the market, during regular hours, and use limit orders. In 2023, the OCC reported a record year with over 10 billion cleared options contracts. That depth generally helps pricing even as premiums swing with volatility. Costs vary, but a deep pool of traders means better fills and fewer headaches. And fewer headaches in retirement is, well, priceless.

So basically, here’s what you’ll get from this section: why options function like insurance for your nest egg, why timing matters (buy protection before the storm, not during), and the simple, rules-based tactics that don’t require babysitting. We’ll talk about setting a small, steady hedging budget, choosing the right expirations and strikes, and how to size hedges so they protect withdrawals without smothering your upside. We’ll also hit execution tips, because sloppy fills can eat half the benefit, and that’s just annoying.

Bottom line: You hedge to keep your plan on track, not to win a trading contest. Smooth the ride, protect the cash flows, and let the rest of the portfolio do its job.

• Focus on downside protection first; returns second.
• Accept the premium; aim to pay less than the pain you avoid.
• Favor simple, rules-based structures over high-maintenance trades.
• Stick to liquid indexes/ETFs for tighter spreads and cleaner exits.
• Remember: liquidity surged in 2023 per the OCC’s record volume, use that depth to your advantage.

Start with the risk you actually face: withdrawals + sequence risk

Look, the retirement problem isn’t “the market goes down sometimes.” It’s “the market goes down while you’re pulling cash out every month.” Regular withdrawals turn a routine drawdown into a compounding problem because you’re selling more shares when prices are low. That’s sequence-of-returns risk in plain English: early losses hurt more when you’re spending. A simple math check: a 20% drop needs a 25% gain to get back to even; if you’re also withdrawing 4-5% a year during that hole, the hill gets steeper. I watched a client in 2009 keep his spending steady through Q1, great discipline, but it took an extra year to refill the bucket, mostly because the sales during the lows left fewer shares to rebound. Annoying, but real life.

So, define the thing you’re insuring. Your true risk asset probably isn’t the whole portfolio; it’s the equity sleeve, say 40-70% of the pie, plus any concentrated stock that can swing like a gate in a storm. Bonds, cash, and TIPS help, but they’re not the source of the big swings. If you’ve got a 60/40 mix, your “risk engine” is that 60% equities line item. Speaking of which, if you hold a single-name tech position worth 10% of net worth, that’s part of the risk sleeve, not a cute sidecar.

Next, size the pain you refuse to tolerate. Sequence risk means the early-year hit matters most, so pick a max drawdown on the equity sleeve that keeps your plan intact. Example: you might cap a 25% equity selloff to a 10-15% hit on that sleeve via hedges and some cash/Treasuries. That doesn’t mean the whole portfolio only falls 10-15%; it means your riskiest chunk is buffered so you can keep withdrawals steady without flinching. In 2022 the S&P 500 dropped about 19% on a total return basis for the year, and peak-to-trough in 2020 was roughly -34%, those are the kinds of numbers you’re anchoring against.

Match hedge horizon to your spending runway. If you fund spending monthly from the portfolio, protect the next 6-24 months of cash flows. Shorter than six months and you’ll be rolling too often. Longer than two years and you’re likely overpaying for time you won’t actually need. Anyway, if I remember correctly, most retirees I’ve worked with feel best when the next year of withdrawals is essentially “pre-solved.” That can be a mix: some cash, some short Treasuries, and a modest put structure wrapped around the equity sleeve.

Keep cash and Treasuries in the conversation. This year, cash yields are still attractive versus the 2010s, many high-yield savings and short T-bills have been printing around the mid-4% area for much of 2025, after hovering near 5% at times last year (2024). That means partial de-risking doesn’t feel like going to zero; you’re actually getting paid to wait. You don’t need to hedge every dollar if you can shift a slice to 3-6 month T-bills and let options cover only the rump of market risk that keeps you up at night.

Here’s the thing: you also want to be realistic about execution and liquidity. Options market depth is not a problem right now, OCC cleared over 11 billion contracts in 2023, an all-time record by the way, so sticking to index and liquid ETF hedges (SPX, SPY, QQQ, IWM) tends to keep spreads tight. I think the discipline is the harder part: decide your equity sleeve, declare your acceptable drawdown, choose a 6-24 month protection window, and then spend a small, steady budget to keep that promise to yourself. Overpaying for protection because you mis-sized the risk? That’s the easiest avoidable mistake I see… and I still see it, occassionally.

Quick checklist: Identify your risk sleeve (40-70% equities + any concentrated stock). Define the max tolerable drawdown (e.g., cut a 25% slide to 10-15%). Hedge for the next 6-24 months of withdrawals. Use cash/T-bills, higher yields this year make partial de-risking attractive. Keep it liquid and simple.

The practical toolkit: protective puts, covered calls, and collars

So, here’s the thing, most retirees don’t want to babysit a screen. You want simple knobs to turn, not a second career. These three do the job: protective puts, covered calls, and collars. They’re boring, which is exactly why they work. Liquidity isn’t an issue, OCC cleared over 11 billion options contracts in 2023, an all-time record, so sticking to index/ETF options (SPX, SPY, QQQ, IWM) keeps the spreads tight and the execution clean.

Protective puts: you buy downside insurance on your equity sleeve. If your stock allocation is mostly broad-market ETFs (SPY/QQQ/total-market), you can buy 6-18 month puts 5-15% out-of-the-money. That’s it. No management day-to-day. The catch is the premium. Cost swings with implied vol, when markets are calm, a 12-month 10% OTM SPY put can run in the ballpark of 3-5% of notional; when fear rises, that can jump to 6-8%. Honestly, I wasn’t sure about this either when I first started hedging client sleeves in my 30s, but paying a steady 2-4% in quiet regimes often beats puking 25-35% in a bear. And this year, with T-bills yielding roughly 4-5%, you can fund part of that premium by parking your “dry powder” in short-term bills while the put works in the background.

Put spreads: cheaper than straight puts. You buy the higher-strike put (say 95% of spot) and sell a lower-strike put (say 80%) to subsidize the cost. You cap max protection at that lower strike, below it you’re exposed again, but you can slash outlay by 30-60% versus a single put. For retirees, that trade-off often makes sense because the catastrophic, sub-20% tail is less likely in any single year, and you’re hedging the withdrawal window first, not every path to Armageddon.

Covered calls: sell calls on the holdings you already own and collect premium. Use monthly or quarterly expirations 5-10% OTM on SPY/QQQ/total-market ETFs. Those proceeds can offset the cost of your puts. The rub is you cap upside, if the market rips 20%, you might only get, say, 8-10% plus the premium. That’s real. But if the goal is to cut left-tail risk while still clipping income, it’s a fair trade. I like to set call strikes around where I’d happily rebalance anyway; if I’d trim at +8-12%, why not get paid to set that ceiling? I repeat this a lot because it matters: get paid to do what you’d do anyway.

Collars: the retiree special. You buy the protective put and simultaneously sell a covered call. Defined downside and a defined give-up on upside. Net cost can be near zero in calm markets. Example structure I’ve used: 12-month SPY 95/110 collar, long the 95 put, short the 110 call. You’re protected beyond a 5% dip down to the 5% floor and you harvest income if the market grinds, but you’re out above +10%. It’s not perfect, nothing is, but it’s simple to maintain and you can size it to exactly the cash-flow window you care about.

What to hedge with: favor broad-based indexes for diversified sleeves (SPX options settle in cash; SPY and QQQ are great for tax-lots and smaller sizes). Use single-stock puts or collars only if you have a big, concentrated position, think employer stock or a legacy winner you can’t sell for tax reasons. I’m still figuring this out myself on the margin cases, but concentration risk is where targeted hedges earn their keep.

Practical setup

• Define the sleeve: e.g., 60% equities across SPY/QQQ.
• Pick the window: cover 6-18 months of withdrawals; roll semi-annually.
• Choose structure: straight put (cleanest), put spread (cheaper), or collar (low-cost).
• Finance with income: covered calls and T-bill yield cover part of premiums this year.
• Keep strikes round: 5-15% OTM is a good place to start, not perfect, but good.

Look, there’s art in the strike selection, no pretending otherwise, and, anyway, markets will make you feel smart and dumb in the same week. Actually, let me rephrase that: keep it rules-based, size it small, and let the math work. The whole point is to turn a nasty 25% slide into something like 10-15%, so you don’t have to sell shares to fund living expenses at the worst moment. That’s the job. That’s the whole job.

How much and how long: sizing with beta, delta, and time

Here’s the thing, translate portfolio risk into contracts, mechanically, so you don’t outsmart yourself on a bad day. You hedge the equity sleeve, not the whole portfolio. If you’re 60/40 and the 60% is in equities, size the hedge off that slice, not the cash and bonds that already cushion drawdowns. It sounds obvious, but I’ve watched plenty of smart folks over-hedge and then wonder why their returns lag in calm markets.

Adjust for beta. If your equity sleeve has a 0.9 beta to the S&P 500 (common for diversified large-cap mixes), you don’t need a full 60% notional hedge against SPX or SPY, you’d scale it by beta. Example: $1,000,000 portfolio with 60% equities = $600,000 equity sleeve. At 0.9 beta, hedge notional ≈ $540,000. That’s the baseline before you choose how much protection you actually want working day to day.

Target hedge ratio. For core protection, I like 50-70% notional on the equity sleeve, enough to blunt a shock, not so much that you cap all upside. Go higher, 80-100%, only if you have near-term spending needs (the next 6-12 months) you absolutely must fund without selling stock. Anyway, I know some folks feel safer at 100%, I get it, but that’s expensive and, honestly, it can backfire when markets drift up and time decay eats you alive.

Time: 3-12 month maturities, laddered. Use quarterly rungs to reduce timing risk: e.g., Dec, Mar, Jun, Sep. That way, something is always rolling into fresh protection. Think of it like a CD ladder, except it’s options. I slip into jargon sometimes, “laddered term structure”, which just means you stagger expirations so you’re not hostage to one date.

Strikes: keep it simple. Puts 5-10% out-of-the-money for crash protection; that’s the sweet spot where premium is still reasonable but you get real convexity in a selloff. If you like collars, sell calls 5-10% OTM to offset put cost. Yes, you clip some upside, but it funds the defense. I used to hate giving up upside, still do, a little, but the math works for retirement cash flows. This actually reminds me of a family client in 2020 who slept better the day we added a 7% OTM put spread, peace of mind has a price, and it was worth it.

Delta targets and roll rules. This is where discipline pays. Set a target net hedge delta, say you want your puts to cover ~0.5 to 0.7 of your equity sleeve’s beta-adjusted exposure during a shock, then check monthly. If delta drops below your target because the market rallied or time passed, roll to re-center strikes. If time decay erodes value to where the option has less than, say, 30-40% of its original premium and the clock is under 60 days, roll on a set calendar. Don’t improvise because, you know, the one day you “feel” like waiting is usually the day the market gaps lower.

Concrete example (numbers rounded for clarity):

• $1,000,000 portfolio; 60% equities in SPY/QQQ blend; equity beta to SPX ≈ 0.9.
• Beta-adjusted equity exposure: $600,000 × 0.9 = $540,000.
• Hedge 60% of that = $324,000 notional.
• At SPY ≈ $500 (illustrative), that’s ~648 SPY delta worth of protection. You could use 7% OTM puts across Dec/Mar/Jun/Sep, split into four equal tranches, and sell 7-10% OTM calls on a smaller notional to subsidize.

Now, market context matters. This year has been choppy, dispersion is high, and realized volatility has jumped around week to week, which makes the ladder even more helpful. Honestly, I wasn’t sure about keeping maturities as short as three months for retirees a few years ago; I preferred 6-9 months. But with rates still decent and option carry manageable, the quarterly rhythm is working, at least for me.. but that’s just my take on it.

Checklist to stay out of your own way:

• Hedge the equity sleeve only.
• Scale by beta (0.9 beta = 90% of sleeve).
• Size 50-70% notional for core protection; more only for near-term spending.
• Use 3-12 month maturities; ladder quarterly.
• Puts 5-10% OTM; calls 5-10% OTM if collaring.
• Roll when delta falls below target or time decay bites, on a calendar, not vibes.

Oh, and enthusiasm spike here, once you set this up, maintenance gets boring in the best way. You rebalance, you roll on schedule, you don’t second-guess every headline. I’ll take boring and solvent over exciting and broke any day.

What it costs right now (and how to keep the bill sane)

So, premiums live and die by two things: volatility and rates. In 2025, cash still pays, and vol keeps whipping around. That combo is actually your friend if you don’t overpay for protection. Here’s the bottom line I budget: expect premium drag of roughly 0.5%-2.0% per year on the equity sleeve, depending on how far out-of-the-money you go, the maturity you pick, and how spicy implied vol is when you buy. If you’re striking puts ~5-10% OTM and rolling quarterly, you’ll hang out in the middle of that range most years, assuming you don’t chase weeklies at bad prices.

When implied vol is rich relative to realized, don’t be a hero, use collars or put spreads to cut cost. Historically, the S&P 500’s 1-month implied minus realized volatility spread has tended to be positive. Cboe studies across 2006-2023 show a typical premium in the ballpark of ~2-4 volatility points between implied and realized on average (not every month, but often enough to matter). Translation in plain English: you can sell some upside to subsidize the downside when the market is paying up for options. As I mentioned earlier, the goal is staying solvent, not winning style points.

And during calmer stretches, covered calls are your workhorse. You’re harvesting time value to pre-fund future puts. I like 1-3 month maturities and 5-10% OTM calls on the core equity sleeve. When vol cools off and realized is sleepy, you’ll recieve steady decay without giving away the farm, usually. Just remember the give-up: in a sharp rally you’ll trail; that’s fine if you planned it that way.

Look, avoid illiquid weeklies for your core hedges. Weeklies are handy for tactical tweaks, but the bid/ask and gamma can chew you up. Monthlies or quarterlies usually price better, are easier to roll, and line up with the quarterly “ladder” we talked about. I’ve paid the impatient tax on weeklies more than once.. but that’s just my take on it.

Stress test the plan. Don’t guess, pencil it out:

• Pick a 20-30% index slide (think real life: the S&P 500 fell about 34% peak-to-trough in Feb-Mar 2020).
• Estimate your unhedged drawdown on the equity sleeve (beta-adjusted).
• Add the hedge payoff at your put strike(s) or spread width; subtract any short-call give-up if you’re collared.
• Include option P&L from decay and slippage; add your cash/yield cushion from T-Bills if that’s in the sleeve.

Your target is a net drawdown you can live with and fund spending against. If your worst-case still looks too ugly, either widen the put spread less, push maturities a touch longer, or bump notional toward the high end of that 50-70% range. And one small but practical note: cash yields still help offset drag this year, even if the exact print moves around month to month, which means you don’t need to over-insure. Actually, let me rephrase that, insure enough, then let carry do a bit of the lifting.

Rule I keep taped to my screen: pay for the first 10-15% down, finance it with time value when you can, and don’t chase vol when it’s screaming, roll on a calendar, not vibes.

Where to place hedges: IRA, Roth, taxable, and the tax wrinkles

Same trades, very different after-tax outcomes. Here’s the thing: you want hedges where they’re simple to run and not tax-ugly. That usually means putting income-y option overlays where they won’t trigger the worst rates, and keeping uncapped growth where taxes won’t touch it later.

• IRAs: Most custodians allow covered calls, cash-secured puts, and long puts in IRAs (often “Options Level 1-2”). Margin or uncovered calls, usually no. Check the box they call “option approval level” before you plan a calendar-roll schedule. IRAs are tax-deferred, so option P&L isn’t taxed annually. That makes them handy for systematic covered-call income or recurring put spreads. Just remember RMDs kick in at age 73 (since 2023): don’t tie up the whole account in long-dated hedges that make it hard to raise cash for the distribution.
• Roth IRAs: Let growth run. If you cap upside with covered calls in a Roth, you’re basically selling tax-free upside for a small premium, usually a bad trade. I keep the Roth for core growth or protective puts that defend tail risk without capping the top. If I add a collar, I do it light and short-dated.
• Taxable accounts: Equity options (on single stocks or ETFs) are generally short-term gains/losses, taxed at ordinary income rates, up to 37% federally in 2025, plus the 3.8% NIIT for higher earners, and state taxes. That’s a lot. If you’re going to write calls here, lean toward names where the yield plus call premium meaningfully out-earns your after-tax hurdle, or keep maturities short so you can manage basis and timing. And watch wash-sale rules; replacing a loss position in an IRA can permanently disallow the taxable loss (IRS Notice 2008-5).
• Index options: Broad-based index options like SPX are Section 1256 contracts, 60/40 tax treatment (60% long-term, 40% short-term) with mark-to-market on Dec 31 under U.S. tax code. That creates a max federal blended rate near 28% on gains for top-bracket taxpayers, which is usually better than straight short-term. Losses get the same 60/40 blend, and there’s a limited 3-year carryback feature for net 1256 losses against prior 1256 gains if you make the election. I think SPX being cash-settled also avoids assignment headaches.

How I bucket it, practically:

• Roth: Growth I don’t want to cap; occasional tail puts if I’m nervous. Minimal call selling.
• Traditional IRA: Income-oriented covered calls and put spreads; rolling is clean, taxes deferred; keep enough T-Bills or cash for RMD liquidity.
• Taxable: Use SPX/other 1256 for index hedges when you can stomach mark-to-market; if using equity options, keep terms short and be deliberate about realizing losses, not tripping a wash sale, timing matters. Cash yields are still helping offset premium drag this year, so you don’t need to over-insure; just be consistent.

Look, I get it, none of this is fun spreadsheet work. But account placement can change your after-tax outcome by 5-15 percentage points on the same trade; that’s real money. Quick tangent: earlier this year, a client capped their Roth with weeklies for “just a little” income… and then missed a 9% pop. Great trade? Not really. Anyway, set the hedge where taxes and mechanics help you, not fight you, and keep one eye on RMDs so your hedge doesn’t eat your liquidity when the calendar flips.

A simple, repeatable playbook you can actually stick with

Here’s the thing: if you give yourself rules you’ll actually follow, you’re more likely to stay hedged when it matters and not torch your weekend fiddling with Greeks. So, a quarterly template that’s boring on purpose:

• Define the risk budget. Cap the equity-sleeve drawdown to something you can live with, say 12-15% in a bad year. That bracket isn’t random. J.P. Morgan’s 2024 Guide to the Markets shows the S&P 500’s average intra-year drawdown is ~14% since 1980. If you set your band there, you’re planning for what happens most years, not the apocalypse. Actually, wait, let me clarify that: you’re targeting the typical punch, not the rare knockout.
• Choose the vehicle that matches your core. Hedge with broad indexes that mirror your exposure. If your core is S&P-like, use SPX or XSP (both 1256 contracts with 60/40 tax treatment). If you’re in total-market funds, VTI/ITOT or ES minis might be cleaner. Keep it broad; single stocks introduce noise you don’t need.
• Implement a collar ladder. Quarterly expiries, 6-9 months out. Buy puts ~10% OTM and sell calls ~5-10% OTM. Do this in three or four tranches across the year so you don’t get stuck with one timestamp. As I mentioned earlier, spreading the timing lowers regret, which, honestly, might be the most valuable risk factor.
• Set a funding rule. Use covered-call income to offset 50-100% of annual put spend. When the VIX sits around its long-run median (Cboe data since 1990 puts it near the high teens), put protection that’s ~10% OTM often costs about low single digits per year. You probably won’t cover every dollar every quarter, and that’s fine. The point is the rule: calls fund the umbrella.
• Monitor quarterly. Rebalance the notional to match your equity exposure, not just number of contracts. Roll when 60-90 days remain. If the market rallies and your short calls are inside 2-3% OTM with two months left, pre-roll to re-center the collar. Document each change, what you rolled, why, and the next trigger, so, you know, you actually stick to it.

Look, I might be oversimplifying a hair, but the mechanics don’t need to be fancy. The data back the guardrails: typical intra-year air pocket ~14% (JPM 2024), VIX usually in the mid-to-high teens over long samples (Cboe since 1990), and index options in 1256 format get that 60/40 tax split irrespective of holding period, useful in taxable accounts. Earlier this year I watched an investor “improve” by cancelling a roll to save 5 bps in premium… and then watch their hedge lapse before payroll data hit. Anyway… don’t do that.

Practical checklist you can run every quarter: 1) confirm equity notional and risk band; 2) top up 10% OTM puts out 6-9 months; 3) reset 5-10% OTM calls sized to fund 50-100% of expected put spend; 4) check expiries and roll 60-90 days out; 5) log the trades, the rationale, and the next price/vol triggers you’ll act on. If you can do that without overthinking, you’ll probably sleep better and still capture most of the upside this year without the stomach ache.

Frequently Asked Questions

Q: How do I budget for hedging each year without overpaying?

A: Keep it simple: target 1%-2% of portfolio value per year for puts or collars. Ladder 3-6 month hedges, add when volatility is calm, and favor put spreads or conservative collars to trim cost. If premiums jump, size down rather than chase. Buy protection before you “need” it.

Q: What’s the difference between protective puts, put spreads, and collars for a retiree?

A: Protective put: you buy a downside floor. Clean, flexible, but you pay full premium. Put spread: buy a put and sell a lower-strike put to offset cost, cheaper, but your protection stops at the lower strike. Collar: buy a put and sell a call; the call premium funds all or part of the put, but you cap upside. For retirees, the trade-off is cost vs. freedom. If you hate paying ongoing premiums, a conservative collar on a portion of equities often hits the sweet spot, some downside cover without heavy drag. If you want full upside, stick with modest puts or spreads and accept the bill. And, look, rules-based rolling every quarter beats tinkering on gut feel.

Q: Is it better to hedge my whole stock portfolio or just a portion?

A: Hedge the cash-flow risk, not your identity as an investor. Practically, that means covering the slice of equities tied to the next 2-3 years of withdrawals and any must-not-lose goals. Example: If you withdraw 4% on a $1M portfolio ($40k/yr), hedging roughly $80k-$120k of equity exposure, or 30%-60% of your stock sleeve if you’re 60/40, usually does the job. Full-portfolio hedges get pricey and can mute long term compounding. I prefer a layered approach: keep strategic equity exposure, hedge a defined tranche with 3-6 month puts, put spreads, or a collar, and rebalance into weakness so the hedge funds withdrawals instead of forced selling. Honestly, it’s about smoothing the ride so bad quarters don’t dictate your life.

Q: How do I set up a simple collar to protect withdrawals on an ETF like SPY, step by step?

A: Here’s the thing: aim for a conservative, rules-based collar on the chunk tied to near-term spending. Example framework: 1) Sizing: If you plan to withdraw $40k/yr, hedge 2 years of that ($80k) on your S&P 500 ETF position. Round to nearest 100-share lots for option contracts. 2) Tenor: 3-6 months is the sweet spot, enough time to matter, not so long premiums balloon. Roll on a set calendar (quarterly), not a hunch. 3) Strikes: Buy a put ~5-10% below current price (your floor). Sell a call ~5-8% above current price to offset cost. Keep it conservative so you’re not capping routine upside too tightly. 4) Cost discipline: Target total annual hedge spend near 1%-2% of portfolio. If premiums spike, widen the put spread or reduce notional hedged rather than overpay. 5) Management: If markets drop, you can use gains in the put to fund withdrawals or rebalance into equities. If markets rally and your short call is threatened, either roll it up/out or let shares get called away on that hedged slice, then rebuy on your next roll. 6) Accounts/taxes: In IRAs, collars are generally permitted with options approval. Taxable accounts can get messy, index options (e.g., SPX) have 1256 treatment while ETF options (e.g., SPY) don’t. Talk to your CPA before you get cute. Anyway, keep it boring, repeat quarterly, and don’t oversize, insurance, not a trade.

@article{hedge-your-retirement-now-with-options-not-bets,
    title   = {Hedge Your Retirement Now with Options, Not Bets},
    author  = {Beeri Sparks},
    year    = {2025},
    journal = {Bankpointe},
    url     = {https://bankpointe.com/articles/hedge-retirement-with-options-now/}
}