Build a Safe Retirement Portfolio for Rising Unemployment

Why timing can make or break your retirement plan

I’ve watched more retirements wobble from bad timing than from bad investing. Not kidding. In Q4 2025, with unemployment popping higher and headlines turning jittery again, the math changes fast for anyone already retired or within a couple years. When paychecks stop, the order of returns matters more than the average return you eventually earn. That’s the sequence-of-returns problem in one sentence.

Here’s the quick picture. Two portfolios both average 6% over 15 years. One gets hit with a -20% and -12% in the first two years, then recovers. The other gets the same losses in years 14-15. If you’re withdrawing 4% a year adjusted for inflation, the early-loss portfolio can end up with 25-35% less wealth by year 15, even though the averages match. I’ve run versions of this in client reviews for years; the gap is stubborn. Early losses + withdrawals = a hole that’s hard to climb out of because you’re selling more shares at lower prices to fund living expenses.

Now layer in job risk. Rising unemployment raises the odds you’ll be forced to tap assets at bad prices. History is blunt about this. The U.S. unemployment rate hit 10.0% in October 2009 during the financial crisis (BLS), and it spiked to 14.7% in April 2020 during the pandemic (BLS). Equity markets fell roughly 57% peak-to-trough in 2007-09 and about 34% in 23 trading days in March 2020 (S&P Dow Jones Indices). If you had to fund expenses during those windows, your “average return” was irrelevant, your sequence did the damage. Frankly, it still does.

My take, and it’s just that, one practitioner’s view after two decades on the desk: in a shaky job market like we’re seeing into year-end 2025, cash flow planning is your first risk control. Not asset allocation tweaks. Not a clever factor tilt. Cash. Flow.

Sequence-of-returns risk isn’t about being unlucky in the market. It’s about being forced to sell when you’re unlucky.

What you’ll learn in this section: why the timing of returns plus the timing of withdrawals drive outcomes more than long-term averages; how unemployment spikes increase the chance you’ll sell at terrible prices; and the simple planning moves that buy you time. We’ll even touch on tools like a short-duration cash sleeve and, yes, a TIPS ladder, though I’m getting ahead of myself.

• Market returns + withdrawal timing drive outcomes more than averages: A portfolio suffering a -20% hit in year one with a 4% real withdrawal can require 30%+ higher future returns just to get back on track compared with the same returns arriving later. The compounding gap is real.
• Rising unemployment = higher forced-sale risk: Layoffs mean withdrawals start earlier than planned. During 2008-09, the S&P 500’s drawdown exceeded -50% while unemployment reached 10% (BLS; S&P). That combo is exactly when sequence risk bites.
• Cash flow planning is risk control: Building 12-24 months of essential expenses in cash/near-cash can cut the chance of selling equities during a deep drawdown. A simple buffer like that has historically reduced “failure” odds in retirement simulations when early bear markets occur, more on the numbers in a bit.

This isn’t about fear. It’s about acknowledging that, right now, paycheck risk and market risk are linked. If you handle the cash flow side first, your portfolio gets the one thing it needs most during drawdowns: time. And time, messy as it is, usually does the heavy lifting.

What rising unemployment usually does to portfolios (and what’s different now)

Here’s how I think about it, and I’m going to narrate the thought process because it helps. When layoffs pick up, revenue growth slows, then margins compress, then earnings estimates get cut. It’s not linear in the moment, but the chain is pretty reliable over cycles. Analysts who were modeling +8% EPS growth suddenly clip it to +3%, then flat, then -10% in a tougher tape. That estimate drift alone can take price/earnings multiples down a turn or two because investors stop paying up for shrinking profits. In plain English: higher jobless rates tend to mean lower earnings and lower multiples at the same time. Double whammy.

History won’t predict 2025 perfectly, but it at least frames the risk:

• Earnings sensitivity: During the Global Financial Crisis, S&P 500 operating EPS fell roughly 40% from the 2007 peak into 2009 (S&P Dow Jones Indices). In 2020, operating EPS dropped roughly 20% year-over-year at the trough before roaring back in 2021 (S&P). Different causes, same pattern: unemployment up, revisions down.
• Credit spreads widen fast: The ICE BofA US High Yield OAS blew out above 1,800 bps in late 2008 and near ~1,000 bps in March 2020 (ICE Data). Investment-grade spreads also jumped (around 600 bps at the 2008 peak; ~370 bps in March 2020). That widening is equity risk in disguise because it lifts discount rates and raises refinancing costs.
• Defaults climb in recessions: Moody’s measured the global spec-grade default rate peaking around 14% in 2009 and near 6-7% in late 2020 (Moody’s Investors Service). High yield is usually where the cracks show first when payrolls weaken.
• Dividends are steadier, not sacred: Payouts held up better than prices in both episodes, but they were cut. S&P 500 cash dividends fell meaningfully in 2009 from 2008 levels (S&P), and dipped modestly in 2020 even as a wave of sector-level cuts (airlines, energy, parts of consumer) played through. If you’re banking the mortgage on a dividend, make sure it’s covered by free cash flow, not just hope.

Okay, now translate that to actual portfolio levers in Q4 2025:

• Earnings and sectors: Cyclicals (small-cap industrials, consumer discretionary, regional banks) tend to wear downgrades fastest when job losses rise. Defensives (staples, utilities, parts of health care) usually see smaller estimate cuts, but they’re not immune if pricing power fades. I still separate “rate sensitive” from “cyclical sensitive” in my head; not the same thing.
• Credit and spread beta: If unemployment drifts higher from here, expect wider HY and loan spreads. That can be an opportunity if you have dry powder, but for existing holdings it means mark-to-market pain and recession-skewed default risk. Senior secured loans add collateral, yet they’re floating-rate; if rates stay high longer than you want, interest coverage weakens. Pick your poison, spread or duration, but know which one you own.
• Dividend stability check: Look for payout ratios beneath 50-60% and multi-year free cash flow coverage. In 2009, the “safer” names were the ones that could self-fund. Same in 2020. I like boards that were conservative last year; they tend to be conservative this year too.
• Small-cap cyclicality: Russell 2000 earnings are notoriously swingy. In 2008-09, small caps underperformed into the recession and then outperformed off the bottom. In 2020, they fell harder in the drawdown and ripped in the reopening. Translation: higher beta to labor stress on the way down, better torque on the other side. Size your position so you can actually hold it through the ugly middle.

One small but big thing this year: cash isn’t trash anymore. Short T-bills and high-quality money markets have spent 2025 printing roughly 4-5% yields, depending on month and product.

That changes behavior. In 2019, sitting in cash earned almost nothing, so people reached for risk. This year, safety pays. That means you can carry a 12-24 month expense buffer (for the job risk we talked about earlier) without feeling like you’re lighting money on fire. It also means you don’t have to force equity buys on every dip. Wait. Get paid. Then redeploy when spreads and earnings expectations reset to reality.

Quick over-explanation before the point: a 5% cash yield on a $100k buffer is $5k in annual income. That’s a month or two of expenses for a lot of households. Which reduces the odds of selling stocks after a layoff, exactly when prices are down and credit is tight. The point: cash yield is a real risk-control tool again, not just a parking lot.

Net-net, rising unemployment usually means: lower EPS, wider spreads, higher default risk, and more dividend triage. What’s different now is that your ballast, cash and near-cash, actually earns something, which buys you time to be picky on risk assets instead of feeling pushed into them. I’ll take that tradeoff any day.

Build your safety layers first: cash, bills, and boring that works

The “sleep-at-night” bucket is boring on purpose. Start with 12-24 months of withdrawals in cash and T‑Bills so you’re not selling stocks into a panic. If you spend $6k a month, that’s $72k-$144k earmarked. Earlier I said 5% on $100k is $5k a year, same math applies here and it matters when job markets wobble. Short rates are still decent this year, so cash finally pays you to be patient. That patience is the point.

How to keep it simple without making it fragile under stress:

• Tier 1: 6-12 months in cash in FDIC/NCUA‑insured accounts. Check the limits: FDIC insurance is $250,000 per depositor, per insured bank, per ownership category (same $250k at NCUA for credit unions). That’s statutory and has been the standard for years. If you’re holding more than that at one bank, spread it. Joint accounts have their own category, which can expand coverage, but don’t get cute if you’re going to forget the structure when you actually need the money.
• Tier 2: 6-12 months in T‑Bills. Use a 3-12 month ladder, 13-week, 26-week, 52-week, so something is always maturing. Most brokers and TreasuryDirect let you set auto‑roll, which means maturities reinvest automatically. Low maintenance. Also, T‑Bills are backed by the U.S. government and the interest is exempt from state and local income taxes, which is a quiet kicker for high-tax states.

Then, when that cash/T‑Bill sleeve is set, add a high‑quality bond ladder behind it. Think 2-5 year Treasuries and investment‑grade munis or corporates (A/AA). Keep the ladder simple: even rungs, same coupon style, no exotic structures. The idea is to lock in known cash flows, not to impress your future self with clever footnotes. I’ve seen too many people build intricate ladders that looked great in a spreadsheet and fell apart when they needed to raise $25k on a Tuesday.

Rule I remind clients (and myself): if you can’t explain the account map and maturities on a Post‑it, it’s too complex for a crisis.

Two admin notes people gloss over:

• FDIC/NCUA: again, $250k per depositor, per institution, per ownership category. If you’re using brokered cash sweeps, read the disclosure to see which program banks you’re actually landing in and how the limits stack. Consolidated statements don’t equal consolidated insurance.
• I Bonds for the long safety sleeve: useful for inflation protection but capped. The Treasury sets a purchase limit of $10,000 per Social Security Number per calendar year for electronic I Bonds, with an additional $5,000 via federal tax refund in paper form. Those caps have been in place for years. So yes, they’re a nice brick in the wall, but they won’t build the whole wall in one year.

Quick course-correct on sizing: start at 12 months if you have stable income and low fixed costs; go to 24 months if you’ve got variable comp, single‑income household, or you just hate volatility. There’s no trophy for cutting it close. And if markets crack for a quarter (or longer), this structure lets you wait without flinching, bills mature, coupons land, and you choose when to sell risk assets, not the other way around.

Implementation checklist, I keep it short on purpose:

1. Map 12-24 months of net spending. Park 6-12 months in insured cash; the rest in a 3-12 month T‑Bill ladder with auto‑roll on.
2. Build a 2-5 year ladder of Treasuries and IG bonds; keep credit simple and position sizes small.
3. Track FDIC/NCUA exposure by institution and ownership category quarterly. Boring, but necessary.
4. Layer I Bonds annually up to the $10k (plus $5k via refund) limit. Slow and steady.

One last thing, yes, yields change. They’ve moved plenty this year. That’s fine. The architecture here works across cycles because it’s designed for cash flow and control, not prediction. When the uncomfortable stuff happens, and it will, simple beats clever.

The defensive core: quality fixed income, then equities that can take a punch

If unemployment is drifting higher (and that’s the risk that matters in Q4), your core should do two things at once: keep real spending power intact and leave you calm enough to buy when everyone else is selling. That means high‑quality bonds first, then an equity sleeve that earns its keep when earnings wobble, not a hope basket of story stocks.

Fixed income: Treasuries, agencies, IG credit

• Anchor in quality: Start with U.S. Treasuries across the curve, add agency MBS (GNMA/UMBS, explicit or strong implied guarantees), and sprinkle investment‑grade corporates. When layoffs spread, funding stress hits lower‑quality credit first. You want instruments that pay you to wait without headline risk.
• Balance duration (hedge recessions without being a rate hostage): The goal isn’t to max duration; it’s to own enough interest‑rate sensitivity to offset equity drawdowns. Practically, many retirees land around a portfolio duration of ~4-6 years. I usually build it with a barbell: some 0-2 year Treasuries for liquidity, some 7-10 year Treasuries for recession beta, then IG corporates and agency MBS in the 3-7 year lane. If that sounds like alphabet soup, fair, it just means don’t bet the house on one maturity.
• Add TIPS for real risk: Pair nominal Treasuries with TIPS so you can fund groceries and utilities in real terms. Notably, the 10‑year TIPS real yield spent parts of 2023 and 2024 above 2% (first sustained stretch since 2009), which made inflation protection pay again. TIPS hedge unexpected inflation; nominals hedge growth scares. You need both.
• Avoid reach‑for‑yield traps: High‑yield looks tempting until unemployment rises. Historically, defaults jump in downturns: Moody’s puts the long‑run global HY default rate around ~4% since the 1980s, peaking near 14.7% in 2009; S&P tracked roughly ~6-7% during 2020’s shock. Those are real loss rates, not mark‑to‑market noise. Keep HY small or barbelled with Treasuries, or skip it when pink slips start showing up.

Equity sleeve: resilience over sizzle

• Go global, on purpose: Don’t let home‑bias run your plan. As of 2024, the U.S. was ~61% of MSCI ACWI by market cap, big, but not 100%. Own developed ex‑US and a measured slice of emerging markets; currency and sector mix help when U.S. leadership takes a breather.
• Tilt to quality and value: Strong balance sheets, high return on capital, and sane valuations survive margin pressure better. It’s boring; it’s also how you avoid forced sellers. I still remember 2001, unprofitable “new economy” names cratered while boring cash‑rich compounders kept paying dividends.
• Prefer low‑vol and dividend growers to story stocks: In 2008, S&P Dividend Aristocrats fell about ~22% versus the S&P 500’s ~37% drop. Doesn’t mean they’re magic; it means steady cash payers tend to hold up better when credit tightens and layoffs hit. Low‑vol indices have historically delivered smaller drawdowns with comparable long‑run returns, which is exactly what you want when sleep is a risk factor.

Sizing and maintenance (where most people slip)

• Keep position sizes sane: No single corporate bond over 1-2% of the portfolio; no sector bet over 10-15% unless you truly understand the cyclicality. Recency bias bites, cap it ahead of time.
• Rebalance into weakness using predefined bands: I like 5/20 bands: if an asset class drifts 5 percentage points or 20% relative from target (whichever is larger), rebalance. Write the rule down now; follow it when your stomach says don’t. Yes, mechanical beats heroic.
• Cash flow first: Coupons and dividends should cover planned withdrawals for a while so you’re not selling equities at the lows. Over‑explain a simple thing here: if money comes in regularly, you can avoid selling stuff that’s down; avoiding selling stuff that’s down, protects compounding; protecting compounding keeps you retired. That’s the point.

Humility beats bravado. I don’t know the exact path of rates or earnings this quarter. What I do know: high‑quality bonds plus resilient equities have historically handled rising unemployment far better than yield‑chasing portfolios that look great right up until they don’t.

Income you can’t outlive: Social Security timing and annuity building blocks

Income you can’t outlive: Social Security timing and annuity building blocks

When paychecks stop, sequence risk gets real fast. A simple antidote is locking in some income you can’t outlive so market drawdowns don’t dictate your lifestyle. Two levers here: Social Security timing and plain‑vanilla annuities.

Social Security: delay if you can, bridge if you must. Every year you delay after Full Retirement Age (FRA) boosts your benefit by about 8% per year up to age 70. Claiming at 62 can cut your monthly check by roughly 25-30% versus FRA, and that reduction is permanent. These benefits are inflation‑adjusted for life: the cost‑of‑living adjustment (COLA) was 8.7% for 2023 benefits (a big deal during that inflation spike), 3.2% for 2024, and 3.2% again for 2025. That inflation kicker is why delaying helps, you’re increasing an inflation‑indexed stream.

Late‑career job loss? It happens. If you’re 62-64 and got laid off this year, the gut reaction is to file immediately. Before you do, run the numbers on a bridge. Use the cash bucket you’ve already set aside, ideally 12-24 months, to cover expenses and hold off claiming. That preserves the higher lifetime benefit and keeps your equity sleeve from forced selling after a drawdown. Yes, it’s just boring cash. But boring can be brilliant when markets are jumpy and unemployment is drifting higher into year‑end.

Simple annuities as a buffer. Single‑Premium Immediate Annuities (SPIAs) and Deferred Income Annuities (DIAs) convert a slice of assets into a lifetime paycheck. That paycheck doesn’t care what the S&P does on Tuesday, which reduces sequence risk in the rest of the portfolio. As of October 2025, market quotes I’m seeing for a 65‑year‑old, life‑only SPIA are typically in the mid‑6% to low‑7% annual payout range (male a bit higher than female; joint life a bit lower). That’s a payout rate, not an IRR, but it gives you a feel for the income density you can buy with today’s still‑elevated yields compared with the pre‑2022 era.

QLACs inside IRAs for longevity risk. SECURE 2.0 (effective 2023) set the Qualified Longevity Annuity Contract limit at $200,000 inside IRAs (the old 25% cap went away). A QLAC lets you use IRA dollars to buy income that can start as late as age 85, and the amount you put into the QLAC is excluded from Required Minimum Distribution calculations while you wait. Translation: you carve out a chunk to handle age‑85‑plus longevity without over‑withdrawing in your 70s. For folks with long‑lived parents, or who just don’t want to be 92 and negotiating a bear market, this is a useful tool.

How to integrate it, practically:

• Map your floor: Add up Social Security (use the delayed amount), any pension, and the annuity paycheck. Aim to cover non‑negotiables: housing, food, healthcare, taxes.
• Bridge to 70: If you’re still pre‑70, size your cash/TIPS bucket to fund the gap until Social Security maximizes. In years like 2025 where short‑term yields remain decent versus the 2010s, the opportunity cost of waiting is lower.
• Slice, don’t swallow: Start with 10-30% of fixed‑income assets into a SPIA/DIA/QLAC mix, not half your net worth. Keep flexibility.
• Shop smart: Get 2-3 competitive bids. Prioritize payout rates and insurer financial strength (A.M. Best A/A+ or better). Skip bells and whistles that cut the paycheck unless they solve a specific risk you actually have.
• Mind the guarantees: State guaranty association coverage exists but varies by state and caps are limited; don’t test the limits. Spread carriers if needed.

One more real‑world note. I sat with a couple this summer, early 60s, one job lost, portfolios decent but skittish. We used 18 months of cash to delay her filing to FRA, bought a small life‑only SPIA equal to their property tax and utilities, and kept the rest in a 60/40 with those 5/20 rebalance bands you saw above. Two months later, markets wobbled and they didn’t flinch. That’s the point.

Quick recap you can act on: Delay Social Security if you can, those 8% credits plus COLAs are hard to beat. Use bridge cash to wait. Consider SPIAs/DIAs to turn rate levels into permanent income and cut sequence risk. If longevity is your big worry, the 2023 SECURE 2.0 QLAC limit of $200,000 inside IRAs is tailor‑made for that. And please, price the income and the insurer, not the brochure. Get a couple bids and be boring on purpose.

Markets can be moody. Your bills aren’t. Build the paycheck first; let the portfolio be the relief pitcher, not the starter.

Tax moves to make in a layoff or down‑income year

Weird silver lining to a rough work year: your tax bracket probably got smaller. That creates room, real, quantifiable room, to clean up the balance sheet. Aim the energy at four areas: brackets, healthcare subsidies, retirement rules, and realized gains/losses.

Bracket management and Roth conversions

• Use the lower bracket year to do partial Roth conversions. Fill up the 12% or 22% ordinary income brackets rather than jumping into the next one. Don’t convert to the point you trip other cliffs (more on that below). After TCJA sunsets end of 2025, brackets are scheduled to rise, so conversions this year can be worth a lot relative to later years.
• Remember the 0% long‑term capital gains bracket. In 2024, it ran up to about $47,025 taxable income for single filers and $94,050 for married filing jointly (indexing nudges these each year). If your taxable income sits in that zone, you can harvest gains at 0% federal rate, careful, because harvesting gains increases AGI, which touches ACA/IRMAA.

ACA subsidies and IRMAA, watch the cliffs

• If you’re self‑paying health insurance, model ACA premium tax credits before converting too much. The Inflation Reduction Act kept enhanced subsidies through 2025, capping benchmark premiums at ~8.5% of household income, with no hard 400% FPL cliff until after 2025. But every extra dollar of MAGI reduces the credit, death by a thousand paper cuts.
• For context, the 2024 HHS poverty guideline (used for 2025 ACA coverage in most cases) is $15,060 for a 1‑person household and $31,200 for a family of 4 in the contiguous U.S. That makes 250% FPL roughly $37,650 (1‑person) and $78,000 (family of 4), CSR benefits phase out by there. Source: HHS 2024 guidelines. Not trivia, these thresholds decide whether an extra $5k Roth conversion is worth it or not.
• Medicare IRMAA is still cliffy. For 2024, the first IRMAA tier starts at $103,000 single / $206,000 MFJ MAGI (based on tax returns from two years prior). 2025 premiums look at 2023 MAGI. If you’re 63 now, a big 2025 conversion can raise Part B/D premiums when you’re 65. It’s not fatal, just expensive. Keep conversions a hair below the next tier when possible.

RMDs, QCDs, and the age rules that matter

• SECURE 2.0 (2023) moved the RMD start age to 73 and to 75 beginning in 2033. Fewer forced withdrawals means more room to convert strategically in your 60s, especially in a gap between jobs. I keep a boring spreadsheet that marries projected RMDs, brackets, and ACA, because the order of operations matters.
• QCDs are still allowed starting at age 70½. Since 2024, the QCD limit is indexed ($105,000 in 2024). If you’re charitably inclined, giving from an IRA can cut your future RMD base and keep AGI lower than if you itemized. In a down‑income year, you might do both: small conversion up to the bracket edge and a QCD to manage AGI. Yes, slightly nerdy. It works.

Harvest losses and clean up taxable accounts

• Tax‑loss harvest into similar (not substantially identical) holdings. Losses offset realized gains first, then up to $3,000 of ordinary income per year under long‑standing U.S. rules; the rest carries forward. Wash‑sale rules still apply, avoid buying the same or substantially identical security 30 days before/after the sale.
• Pair this with asset location: push tax‑inefficient assets (taxable bonds, high‑yield, TIPS funds that spit out real income) into tax‑deferred accounts where possible. Keep broad equity index funds/ETFs in taxable for qualified dividends and deferral, and consider munis in taxable if you’re in higher brackets. It’s not glamorous, but it compounds.

Real talk moment: I know this feels like threading a needle while the room is shaking. Rates are still elevated, money markets near 5% for most of this year, equities choppy since midsummer, and unemployment nudged up, so, yeah, emotions. The move is to quantify. A one‑page plan that says: convert $X up to the bracket line, keep MAGI under $Y for ACA/IRMAA, harvest $Z in losses, and rebalance on schedule. That’s it.

And, sorry, I’m going to over‑explain something simple because it keeps saving clients: AGI flows into MAGI, MAGI drives ACA and IRMAA, and Roth conversions increase both. So the order is: estimate healthcare subsidies and IRMAA tiers first, set a MAGI ceiling, then back into the conversion amount. Not the other way around. I used to wing it; got burned once; never again..

Turn the bad income year into a tax bracket you’ll never see again. Use it. Don’t waste it.

Putting it together: the playbook I’d want if my paycheck stopped tomorrow

Here’s the one-pager you can actually run this quarter. Not perfect, but it’s tight and repeatable, and when your stomach flips because futures are red at 6:12 a.m., you can just follow the script instead of arguing with yourself.

• Map the three buckets
  – Cash: 12-24 months of core spending (post-tax, net of any unemployment benefits). Park in FDIC/NCUA-insured high-yield savings or T-bills; money funds have sat near ~5% for much of 2025, but assume 4-4.5% for planning so you’re not surprised if yields slip.
  – High-quality bonds: 3-7 years of spending in short/intermediate Treasuries, agencies, and AA/A corporates. Keep credit simple. Laddered Treasuries or a low-cost fund works; I still like mixing some TIPS for real spending shocks.
  – Equities: diversified global stock sleeve for growth and eventual refill. You don’t eat this in year one; this is years 8+ money.
• Guardrails withdrawals (Guyton-Klinger style)
  – Start with a dollar withdrawal you can defend (say last year’s spending minus what drops off) and give yourself an inflation raise only when the portfolio had a positive year.
  – If markets drop and your current withdrawal rate drifts more than 20% above your initial rate, cut this year’s withdrawal by 10% (that’s the Capital Preservation rule). If markets run and your withdrawal rate is 20% below the initial rate, give yourself a 10% raise (Prosperity rule). Guyton & Klinger (2006, updated 2013) documented these +/-20% “guardrails” with 10% adjustments as a way to keep plans intact through rough patches.
• Rebalancing bands, pre-defined
  – Use bands so you don’t rebalance emotionally. I use simple 20%/25% bands: if an asset sleeve is off its target by 25% of the target weight (or by 20% in relative terms for narrower sleeves), rebalance back to target. Example: a 60/40 that drifts to 68/32 triggers a rebalance. Write the bands on paper now; don’t renegotiate during a selloff.
• Refill cash in this order
  1) Coupons and dividends, 2) Required distributions or planned Roth conversions that create tax-withheld cash, 3) Bond maturities/sales, 4) Equity trims only when bands trigger. This avoids selling stocks into weak tapes. By the way, S&P 500 dividends did fall about 21% in 2009 (S&P Dow Jones Indices), and we saw a fast -34% price drop in early 2020, so plan for both income and price shocks.
• Quarterly pacing plan (Q4 2025)
  – Week 1-2: finalize 2025 MAGI ceiling (ACA/IRMAA), then back into Roth conversion amount. Lock your spending number for Q4.
  – Week 3: harvest losses if available; refill the cash bucket from coupons/dividends first; check bands, rebalance only if a band is tripped.
  – Week 4: run the guardrail check: if withdrawal rate is >20% above initial, cut by 10% for next quarter; if <20% below, approve a 10% raise. Set calendar reminders for January to repeat.
• Stress-test drill (do it now, not when CNBC screams)
  – Model “dividends -20% & stocks -25%.” That’s not hypothetical, 2009 dividends fell ~21%, and a -25% tape is garden-variety bear. If that happens, what’s your 12-month cash coverage? If it drops below 12 months, pre-authorize a 10-15% discretionary spending cut and pause inflation raises. Also consider smaller Roth conversions to keep MAGI under your line; you can always convert more next year if the job gap shortens.

Two tiny guardrails I keep on my own desk: if unemployment keeps creeping higher into early 2026 and job postings look thin in your zip code, extend cash from 18 months toward 24, and let the bond rung do more work so equities get time, time helps. And yes, this starts to sound complicated, because, well, it is; write it once and you’ll reuse it every quarter. I literally tape the rules inside a manila folder; not cute, but it works.

1. What to revisit if unemployment climbs next year
   – Re-check jobless benefits duration and taxable amounts; reset cash months.
   – Nudge equity allocation down 5 points only if a band is already tripped, don’t override your IPS out of fear.
   – Tighten guardrails: skip raises entirely until a positive year and a 10% recovery off the low.

Next up, worth reading: healthcare coverage bridges (COBRA vs. ACA tiers and how MAGI caps really bite), long-term care funding paths without blowing up liquidity, and the perennial question, pay off the mortgage versus keeping dry powder. Quick personal note: I’ve seen three households this year sleep better with a slightly larger cash sleeve and the mortgage not fully paid; optionality beats a paid-off house when the job market wobbles, even if Grandma disagrees.

Frequently Asked Questions

Q: How do I set up a retirement cash-flow buffer with layoffs picking up in Q4 2025?

A: Think in months of spending, not portfolio percentages. Target 12-24 months of essential expenses (mortgage/rent, food, insurance, meds, taxes) in super-stable stuff: high‑yield savings, 3-12 month T‑bills, or a CD ladder. Keep it boring. Mechanics: (1) Park 3-6 months in an online savings account for bill‑pay. (2) Ladder the rest in 3, 6, 9, 12‑month T‑bills/CDs so something matures every quarter. (3) Refill rules: after up years, top the bucket back to target via rebalancing; after down years, let dividends/interest refill and pause raises to your withdrawals. Guardrails: start at a 3.5%-4% initial withdrawal, skip inflation raises after a negative year, and trim 5-10% if the portfolio falls ~15-20%. Taxes: use IRA/Roth conversions in low‑income months, set withholding to avoid penalties, and harvest losses in taxable if markets are red. Tiny but useful: turn off DRIP on equities you may need for cash, no point reinvesting what you’ll sell next month.

Q: What’s the difference between a bucket strategy and just rebalancing a 60/40 when unemployment is rising?

A: A bucket strategy segregates time horizons. Bucket 1 (cash/near‑cash) funds 1-2 years of spending, Bucket 2 (short/intermediate bonds) covers years 3-7, Bucket 3 (stocks) is 7+ years. You only sell from Buckets 1-2 during drawdowns, which reduces the chance of selling stocks low. Classic 60/40 with periodic rebalancing mixes it all together; it still works long‑run, but if you must withdraw during a selloff, you’re more likely to liquidate equities at ugly prices. In a shaky job market, the bucket method makes the cash‑flow math way easier and tends to shrink sequence‑of‑returns damage because you can wait longer before touching stocks. If you prefer simplicity, you can mimic buckets inside a 60/40 by earmarking 2 years of spend in T‑bills and rebalancing the rest annually.

Q: Is it better to delay Social Security to 70 or keep more in stocks for growth?

A: It depends (yea, I know), but here’s how I frame it: delaying from Full Retirement Age to 70 raises your benefit ~8% per year you wait (per SSA rules, not a market guess). That higher, inflation‑adjusted check is like buying a bigger, government‑backed annuity, great against sequence risk. Keeping more in stocks might boost expected returns, but it adds timing risk right when withdrawals start. If markets stumble early, higher equity won’t feel so smart. Rough guide: if you have decent health, other assets to bridge the gap (cash/T‑bills or part‑time income), and a spouse who benefits from a larger survivor check, delaying is usually the cleaner risk hedge. If you have poor health or no bridge cash, claiming earlier can be rational. I often run a simple breakeven: many folks recoup delaying in their early‑to‑mid‑80s. If that’s within your likely longevity and you hate portfolio volatility, delay tends to win.

Q: Should I worry about selling investments after a big drop this year, and what are my alternatives if I don’t want a giant cash pile?

A: Worry? A little, selling to fund living costs after a 20% slide is exactly how sequence risk bites. Alternatives if two years of cash feels excessive: (1) Short‑duration bond fund (duration under ~2) as your second‑line buffer; it’s not cash, but it’s steadier than stocks. (2) A rolling 6-12 month T‑bill ladder instead of idle cash, same liquidity, usually better yield in 2025. (3) A home‑equity line of credit set up now (unused), as a contingency tap during deep drawdowns, then repay when markets recover. (4) Partial SPIA (single premium immediate annuity) to cover a slice of essential expenses, trades liquidity for guaranteed income, which cuts withdrawal pressure. (5) Flexible spend rules: pause inflation raises and cap withdrawals at 4-5% of current portfolio; if the portfolio is down 15-20%, trim spending 5-10% until it recovers. The theme is the same: buy time so you’re not forced to sell stocks at fire‑sale prices.

@article{build-a-safe-retirement-portfolio-for-rising-unemployment,
    title   = {Build a Safe Retirement Portfolio for Rising Unemployment},
    author  = {Beeri Sparks},
    year    = {2025},
    journal = {Bankpointe},
    url     = {https://bankpointe.com/articles/safe-retirement-portfolio-unemployment/}
}