Retirees get punched in the face, on the Sunday Reads.

Let’s open with one of the most pertinent and eloquent retirement philosophers and life coaches – former heavyweight boxing champ Mike Tyson. “Everyone has a plan until they get punched in the face” offers the pugilist who likely had the most devastating knockout punch in the history of fisticuffs. Most retirees have a plan. Most retirees eventually get punched in the face. That retirement plan, that retirement life plan often gets knocked to the canvas as fast as Marvis Frazier. Iron Mike had 24 first round knockouts, but Marvis lasted only 30 seconds. Marvis didn’t see it coming. And that’s the key whether you’re stepping into the ring or entering retirement. You have to be aware and you have to be prepared. Eventually, the stock market is going to punch you in the face.

In the papers and online there have been a flurry of reports of retirees who are afraid to spend. They are afraid to stick to their plan after taking some very soft body blows. Mike hasn’t even unleashed the viscious uppercuts yet. While we’ve seen some very considerable volatility, core markets in the U.S., Canada and Europe have not entered a bear market. We are not in a recession. For those keeping score, here’s the worst of the recent drawdowns:

U.S. market down 20%
Canadian market down 15%
International markets down 14%

Markets are attempting to recover, guessing that Trump was just ‘kidding’ about starting a wreckless global tariff war.

Or at least, the markets are guessing Trump will HAVE TO bail on his tariff war.

So bad it’s good

I’m sticking to my framing of the Trump economic strategy after it was announced.

My take on the global tariff war concept is …

The bad news is a global tariff war spells economic destruction.

The good news is a global tariff war spells economic destruction.

Essentially, it can’t happen, I think and hope. The markets will push back and so will voters if the economy continues to weaken, and we see a spike in inflation.

I don’t mind being right again 😉 but all of this recent stock market guessing and theatre doesn’t matter. Stocks go up and stocks go down, they bob and weave. This volatility is nothing new. But mostly, and most importantly, markets go up over time. For a retiree, equity markets are the gift that keeps giving, except when they punch you in the face.

Retirees, put up your dukes

A retiree should know what’s coming. When we enter the retirement ring we should assume that we are going to get punched in the face a few times. When trouble brews, our dukes are up. In some way, our dukes are always up. Our portfolio is dukes up, our mindset it dukes up. From the beginning of this blog in 2018 I have offered that …

Awareness is preparedness

Risk management has been a key theme. We always invest within our risk tolerance level whether we are in the accumulation stage, in retirement or in the retirement risk zone. The only good investment (fight) plan is the one you can stick to. You need to be aware of what’s coming and you need to work on your defensive skills.

Know how to block a punch

At the Cut The Crap Investing boxing school for retirees we learn how to use, gold, bitcoin, cash, bonds, annuities, defensive equities and how to put dedicated inflation fighters to work. That’s a key theme for Retirement Club. We had our first Zoom presentation this week for Retirement Club Two, our second group.

The first group set sail in January of 2025, next week in the 4th Zoom presentation we’ll focus on this key chart. A global balanced portfolio spending at a 4.2% rate from 2007.

Can you continue to spend during a bear market knowing that historically, even a simple balanced stock and bond portfolio recovered?

And what about this haymaker?

The 60/40 balanced portfolio ‘made it through’ the dot com crash. We can see that 25 years later the portfolio at a 4% spend rate is hanging in there. The above chart shows the inflation adjusted portfolio value. The nominal value would be much higher. We can also see that the much more conservative 3% spend rate offered a lot of breathing room.

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That demonstrates that a variable spend rate might have been the best defense for a retiree who entered the ring in the year 2000 – perhaps the worst start date of the last 80 years. With a variable spend rate, a retiree would cut back on spending modestly due to that unfortunate start date. They can then pick up the spending rate once the portfolio has offered some meaningful recovery. It’s a retirement planning staple.

The case for enough growth

And here’s another perspective, being too defensive might not allow us to maintain our retirement lifestyle. The year 2022 would have offered a modestly challenging retirement start date. But once again, we see the portfolio recovery.

In the above chart we’re using the wonderful asset allocation ETFs from iShares. The portfolios are at a 4.2% spend rate, inflation adjusted. While we manage risk and our emotions, we have to keep in mind that growth is good.

And of course, keep in mind that the spend rates for portfolios will be determined by our financial plan and retirement cash flow plan. Retirees who self direct might look to some of the retirement cash flow calculators such as:

Retirement Planning – PWL

Who sticks to their retirement plan?

It’s well-known that too many or most retirees don’t spend to their full potential. Especially when we move through periods of market stress. Even if you know the story of the stock market recovery for retirees, it may be hard to execute in the moment.

Studies show that retirees with conservative portfolios spend more. And within that group would be those lucky enough to have a defined benefit workplace pension.

Guaranteed income: a license to spend.

A Globe & Mail article had noted that study and commented …

They found retirees consistently spend approximately 75 per cent of what they could afford to based on available assets, with underspending increasing as retirees get older. Yet, they also found that after controlling for different levels of wealth, retirees with a larger proportion of guaranteed income spent more each year than retirees with a larger proportion of investments.

You can desrisk, almost entirely. That would be like stepping into the ring with Iron Mike, with about two feet of bubble wrap around your body and face. Mike could try and punch you, but you wouldn’t feel it. With the derisk strategy a retiree would move to a very conservative portfolio, 70% to 80% bonds and cash as an example. The retiree would then add more risk and growth potential over time with a reverse equity glide path. Think of it as dollar cost averaging for retirees.

The comforting cash pile

You might hold a considerable cash component or ‘bucket’, perhaps 3 years of spending needs (or more) in cash. You’d draw on the cash in a severe market correction, leaving your equity portfolio or balanced portfolio untouched.

Make your cash work harder at EQ Bank.

And as I wrote in our community space for Retirement Club …

And all said the goal of a generous cash pile is to remove the emotional risk and sequence of returns risk in the initial years of retirement – inflation risk will take a back seat, and that risk can also be managed by the rest of your portfolio that resides outside of your cash pile.

A cash pile can be more mental accounting than anything else, that’s fine. We know that we’re not touching our equities.

Knowing the history of a balanced or balanced growth portfolio, a retiree might be comfortable spending through the downturns, trusting the potential of equity markets and their portfolio to recover. A retiree who also employs defensive equities for retirement might have more confidence. For example, Canadian consumer staples (XST-T) are up 7.0% in 2025 with U.S. and Candian equities in negative territory.

Defense by way of equities

Here’s the defensive sectors in the U.S. (consumer staples/healthcare/utilities) vs the market in 2025.

Utilties are positive in 2025.

A retiree might be flexible, embracing the variable withdrawal strategy, knowing that manages the financial and emotional risk. A varible withdrawal strategy can greatly increases the total spend rate over time.

There are several ways to manage that punch in the face. I encourage you to consider what a market correction and recession looks like, and feels like. And feel free to reach out with questions. You can use the Contact Dale form at the top of this page. You can drop your thoughts in the comment section.

The Sunday Reads

Things are getting busy at Dividend Hawk with many of his companies reporting earnings. Included in the mix is this wonderful defensive stock …

Kimberly-Clark Corporation (KMB) Announces First Quarter 2025 Results and Updates 2025 Outlook; KMB reported Q1 Non-GAAP EPS of $1.93, down 4% versus prior year but $0.04 above estimates. Revenues declined by 6.0% to $4.8 billion, missing estimates by $90 million. For 2025 Management now expects its 2025 Adjusted Operating Profit to be flat to positive on a constant-currency basis versus the prior year, Adjusted Earnings Per share are now expected to be flat to positive on a constant-currency basis and Adjusted Free Cash Flow is now expected to be approximately $2 billion in 2025 compared to a previous expectation of more than $2 billion.

I also hold RTX …

RTX Corporation (RTX) Reports Q1 2025 Results; RTX reported first quarter Non-GAAP EPS of $1.47, 10% above last year’s result and $0.10 more than expected. Revenue came in at $20.3 billion, a 5.2% increase compared to last year and exceeding expectations by $500 million. Company backlog of $217 billion, including $125 billion of commercial and $92 billion of defense. For 2025, Management guides adjusted sales of $83.0 – $84.0 billion, including 4 to 6 percent organic growth, adjusted EPS of $6.00 – $6.15 and free cash flow of $7.0 – $7.5 billion.

And on the growth front, TXN surged after earnings.

Texas Instruments Incorporated (TXN) Reports First Quarter 2025 Financial Results; TXN reported first-quarter GAAP EPS of $1.28, beating analyst expectations by $0.22 and marking a 7% year-over-year increase. Revenue rose 11.2% to $4.07 billion, exceeding estimates by $160 million. For the second quarter, management expects revenue in the range of $4.17 billion to $4.53 billion earnings per share between $1.21 and $1.47.

More on asset allocation ETFs

At Findependence Hub an evidence based approach to investing in the asset allocation ETFS, from BMO. Here’s an interesting bit from that post …

Allen Roth did a study around the benefit of rebalancing over time. In a moderate or balanced portfolio, you can see that it added close to 20% to returns over a year period of almost 20 years. Although there is no guarantee rebalancing will add to your returns going forward, history has shown that it is effective, and it is an important risk control measure.

And another reminder of the poor performance of active management and mutual funds in Canada …

Canadians should avoid most mutual funds.

Banker on Wheels weekend reads offers 14 destinations where retirees can thrive.

BoW also shared Morningstar’s – Are bonds broken as diversifiers for stocks?

First, many investors have historically viewed US Treasuries as the ultimate port in a storm, because the US government has taxing authority over some of the richest companies and citizens in the world. Second, if the stock market downdraft is borne out of unease over the health of the economy, investors expect the Federal Reserve to accommodate with interest-rate cuts, pushing up bond prices. Those two factors help explain why high-quality bonds, especially Treasuries, have been reliable ballast for stocks during recessions.

Bonds have come to the rescue in every recession, but as my readers know – inflation is the wild card. Central bankers are not likely to cut rates if inflation shows up during a period of economic weakness – stagflation. That’s why we might consider some dedicated inflation fighters (PRA-T) to create a form of an all-weather portfolio.

Sadly, Fritz from The Retirement Manifesto is putting his locking his blog pen in the drawer, well mostly. Fritz is retiring from full-time blogging. The good news is that the blog will stay alive, he’s not selling. And Fritz will write when the urge strikes. He’s just too busy living, doing things he enjoys more than sitting at a keyboard.

Hiking (I did a 13-miler last week!)…
Riding my mountain bike in the woods.
Swimming in a lake.
Playing in our garden (that experiment succeeded, we’ve doubled the size this year)
Hanging out at a campground.
Building a fence (we just finished our 170th Freedom For Fido fence!).
Exercising (you can follow me on Strava).
Spending time with our daughter and granddaughter.

Fritz and his wife (and his blog) have demonstrated the importance of having a rich and rewarding lifestyle by design. That was and is perhaps the greatest strength of the blog. Fritz is a favourite of readers of this blog. Congrats Fritz. We will continue to find value in your retired posts and look forward to any future gems.

Dan at Stocktrades looks at Canadian lumber stocks. Who’s standing tall?

Million Dollar Journey looks at the best defence (or war) stocks in Canada. Yes, there are a few.

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Retirement Club

There are a few spots left for the second group of Retirement Club. We set sail later this month. It is a series of monthly Zoom Presentations, newsletters, plus a secure and private online space where we learn, share ideas and chat. Make sure you’re doing retirement right. It’s also suitable for those who are approaching retirement. Use Contact Dale if you’d like more info.

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