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Time Segmentation by Default

In June of 2021, my corporate life ended after an uninterrupted 35-year run. It was a varied and exciting career that took my family from my native Hartford area to Houston to Seattle and back to Houston. I worked for terrific companies and with great people in an industry with a perennially noble mission: providing financial security and preserving dignity in the face of always uncertain life events and always uncertain capital markets.

The end of my corporate career was, in retrospect, the best thing that could ever have happened to me, as it finally prompted me to pursue my decade long desire to take a crack at running my own business. Fortunately, we were about as financially prepared for this kind of change as we could have been. We carried no debt of any kind, retirement accounts were fully funded, and maybe 2-3 years' worth of living expenses were sitting in cash.

But all isn't sweetness and light, despite the excitement of starting this new business, and beginning to develop new client relationships. At age 57, my wife and I are still eight years from Medicare, ten years from full retirement age, funding our own health insurance premiums now for a family of four, and we still have two teenagers to send to college.

We are, ultimately, currently engaged in a time segmentation strategy by default. Until the revenues from my new business are large enough to completely offset our living expenses (sooner than later, I am hoping/planning), we will continue to draw down our cash reserves as we have been doing for the last six months. And let me be frank - it is a discomforting feeling to watch your cash reserves shrink while the stock market also decides to rerate. Talk about a feeling of being somewhat exposed, even with a pretty robust cash reserve remaining.

I continue to think that time segmentation as a retirement strategy is a thoughtful and reasonable approach to setting up assets for retirement cashflows. But I am here to tell you from first-hand experience, it is not a panacea from anxiety. I am a lifelong believer in the capital markets as the best way for the masses to build wealth. But I'm also a human being and as such there is no relief from anxiety when markets swoon after a decade of nothing but roses, and suddenly you find yourself drawing from "bucket one" while you aggressively pursue revenue opportunities to slow or stop the cash burn.

This experience has convinced me that while I will likely follow a time segmentation approach in retirement, given my faith in capital markets, I will also include a robust income floor in our future income plans to help inoculate us from the anxiety that the natural vagaries of capital markets can induce. The quality of retirement income is as important, in my mind, as the quantity.

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