The Investing Playbook for Retirees Who Can't Afford to Lose

The Investing Playbook for Retirees Who Can't Afford to Lose

Dana George, The Motley Fool

Mon, September 21, 2026 at 6:35 PM GMT+3 4 min read

• NVDA +1.34%

Unless you've stopped reading the news lately, you've probably noticed how dire the headlines are. If you're retired and on a fixed income, any news that might affect the finite amount of money you have saved for retirement is sure to be disturbing. You know investing is the best way to grow your funds, but at your age, you may feel as though you can't afford to lose much money.

Because the goal is to protect your money, you need a playbook focused on preserving essential income, managing market volatility, and keeping enough invested to fight inflation.

Missed AI's "Act 1"? Act 2 Could Be 15x Bigger. Most investors think they missed the AI boat because they didn't buy Nvidia in 2005. But according to our analysts, we're only at the end of "Act 1"—the R&D phase. "Act 2" is the global rollout. Continue »

Know what you can't afford to lose

The first step is to identify the money that you truly cannot afford to put at risk. Calculate your monthly retirement budget, separating essentials -- such as housing, food, insurance, and healthcare -- from discretionary spending, such as hobbies and travel.

From that total, subtract guaranteed income, including Social Security benefits, pensions, annuities, and rental income. If your guaranteed income isn't enough to cover the essentials, that shortfall is the portion of your portfolio that must behave like a reliable paycheck rather than a speculative bet.

Let's say that your guaranteed income is $4,000 per month, but your essentials are $6,000 per month. You know that you need to prioritize safety for the assets expected to fill that $2,000 gap.

Prioritizing safety

Anchor the money you need to fill the gap between guaranteed income and essentials in assets unlikely to fall sharply during market downturns. Imagine a bear market where the value of your invested assets drops. If you're forced to sell any of those assets, you'll have to sell more to net the money you need to cover essential expenses.

However, by holding 12 to 24 months' worth of withdrawals in cash and short-term fixed income, you can pull the funds you need from the cash accounts until the market improves. In the case of a $2,000 gap between guaranteed income and essential expenses, this protective measure would require a cash cushion of $24,000 to $48,000.

The question becomes where to keep your cash. Bond ladders with staggered maturities can provide a predictable cash flow while also keeping a portion of your money easily accessible. Other places to keep cash include high-yield savings accounts, no-penalty certificates of deposit (CDs), Treasury Bills, and interest-paying cash management accounts (typically available through financial service companies).

Building buckets

You may feel more secure by organizing your portfolio by time horizon rather than focusing solely on "safe" investments. Here's how that looks:

• Bucket No. 1: This is the bucket that holds 12 to 24 months' worth of potential withdrawals, protecting you from being forced to sell stocks or long-term bonds during a downturn.

• Bucket No. 2: This bucket holds investments designed to keep up with or beat inflation. It's dominated by high-quality fixed-income exposure and a small share of high-quality dividend-paying equities, such as Johnson & Johnson, Mastercard, and Coca-Cola. If you've spent down part of Bucket No. 1, you may want to use earnings from this bucket to refill it.

• Bucket No. 3: This bucket is dedicated to long-term growth. In it are stocks and more volatile bond types. Since this portion of your portfolio is likely to drive the most growth, it's important to rebalance it periodically to keep it from becoming too stock-heavy.

While it's impossible to get through retirement without risk, it is certainly possible to minimize it.

Should you buy stock in Johnson & Johnson right now?

Before you buy stock in Johnson & Johnson, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Johnson & Johnson wasn't one of them. The 10 stocks that made the cut are built for long-term growth and could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $387,158!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $1,365,749!*

That performance is why people listen. With a track record of beating the S&P 500 by 4x, Stock Advisor offers a distinct advantage. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built for the long haul.

See the 10 stocks »

*Stock Advisor returns as of September 21, 2026.

Dana George has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Mastercard. The Motley Fool recommends Johnson & Johnson. The Motley Fool has a disclosure policy.

The Investing Playbook for Retirees Who Can't Afford to Lose was originally published by The Motley Fool