Something odd happens to the way we talk about markets as people move closer to retirement.
During your working life, markets are framed as productive and long-term investments. As retirement approaches, those same markets are recast as dangerous. The instruction arrives early and persists: reduce risk as you age.
All these messages — safety lives in bonds, prudence lives in cash — translate to “as you get older, retreat”. We have built a pension system that mistakes emotional comfort for financial security.
Since automatic enrolment into workplace schemes began in 2012, more than 10 million workers have been placed into pensions where default investment strategies change their asset mix whether they engage or not. Most never choose. A “glide path” does the choosing for them — guiding most people down from risk in the same way.
The vast majority of assets in defined contribution schemes like these sit in default funds. Lifestyle and target-date strategies are not a niche corner of the market, they are the system’s main highway. These strategies were built around a neat retirement script: stop work at a set age, convert your pension into an annuity to pay you a set income for life and steadily reduce risk on a timetable.
That world barely exists now. Retirements are staggered and uncertain. People work longer, phase out gradually or draw income over decades. Yet glide paths still operate as if everyone is heading for the same finish line at the same speed.
Research into target-date funds shows how much outcomes depend on the design of your glide path. Defaults are not neutral. In many schemes, exposure to growth assets such as stocks begins slowing as much as 15 years before retirement.
The system has normalised the idea that getting older means becoming safer and less exposed to growth, even though pensions must support longer lives than they were designed for. That thinking does not stop with workplace pensions. Retail investors mirror the same age-based caution, shifting toward “safer” assets because the system taught them that age itself is risk.
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It helps to explain why so many sit heavily in cash — not because cash is optimal, but because fear has become the organising principle.
Equities are not speculative side bets. They are part ownership of productive businesses, the source of innovation, earnings and expansion. Over long periods they have been the primary driver of real returns that outpace inflation.
Treating diversified ownership of global businesses as something to be feared by age alone is an error. They are the growth engine of long retirements, yet the pension system treats equities as something you should age out of. Retirement is not the end of investing, it is the longest and most demanding phase of it.
A saver in their early sixties may be holding money that needs decades to compound, yet that capital is treated as if its job is largely complete. That’s not cautious, it’s incoherent.
The belief that risk should fall as age rises, which has underpinned lifestyle design, was stress-tested in 2022. Bonds, long sold as ballast, delivered one of their worst declines in decades. The defensive side fell alongside equities. What had been marketed as risk reduction turned out to be risk relocation.
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The framework was exposed as flawed. Bonds did not protect portfolios as investors had been led to expect. The promise of “getting safer with age” collapsed.
What failed was not just protection but the definition of safety itself. “Getting safer” had come to mean suppressing volatility, not protecting outcomes over time. Once safety is defined that way, the response is predictable. As markets fall and retirement approaches, growth is cut because all money is treated as if it shares the same deadline.
Consider two retired people during a market downturn. Both have similar-sized pensions. One holds everything in a single pot and must sell assets to fund spending. Losses are locked in, recovery capital shrinks. The other has spending set aside and leaves long-term investments untouched.
The difference is not comfort with volatility, but how the money is organised.
When investors learn to associate getting older with danger, a wobble that once passed unnoticed suddenly feels consequential. The question becomes: what if it doesn’t come back this time? But the question retirement brings is not whether markets will fall again. They will. It’s whether the next fall will hurt you as much as it feels like it could.
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The goal in retirement is not to avoid market falls, it’s to make sure the next one doesn’t land on money you need soon.
If defaults are meant to protect savers, that protection should come from structure, recognising that retirement money does not all have the same job at once. Default funds dominate not because they reflect how retirement works, but because they are easy to scale. Reducing risk by age is administratively neat while structuring money by time is not.
The problem is not market fluctuations. It’s the mismatch between short-term spending and long-term capital.
A bucketing approach answers this by separating time and protecting future capital. Near-term spending is held aside in cash and defensive assets, while longer-term capital remains invested in equities and is left untouched for years. This structure changes which assets are relied on at different points in the market cycle.
This is not the same as holding a balanced mix of bonds and equities in a single portfolio. A traditional 60-40 allocation still rises and falls as one unit. Bucketing does not change the ingredients but the purpose — insulating money needed soon from market swings while allowing long-term capital time to recover and grow.
When Nasa sent Apollo 11 to the moon it didn’t rely on one structure to carry the entire journey, it staged the mission. Each stage had a specific job at a specific time.
Retirement works the same way. The risk is not owning equities. It’s organising long-term money around short-term fear.
Jessica Cook is a partner in a financial planning practice