The Industry Standard
The Risk Questionnaire
In the financial industry, most planning starts with a form, built out of questions like these. How would you feel if your portfolio dropped 20 percent in a year? If the market fell sharply, would you sell, hold, or buy more? On a scale of one to ten, how would you rate your tolerance for risk?
The problem is what that measures. It captures your mood on the day you filled it out, not your facts. Ask the same person in March 2020 and again in December of 2021 and you get two different investors. Recency bias does that to all of us, and a number that moves with the headlines is a poor foundation for a thirty-year decision.
You circle some answers, the software adds them up, and out comes a label. Moderate. Conservative. That label picks your portfolio.
Risk questionnaires provide useful information, but they cannot determine an appropriate portfolio by themselves. We consider your income, spending, investments, time horizon, and goals alongside your comfort with market fluctuations. The objective is to take the amount of risk your plan requires, not simply the amount that feels tolerable on the day you complete a questionnaire.
Our Starting Point
Your spending number comes first
We start with cash flow. What does your life cost, and how much of that is already covered by Social Security, a pension, rental income, or a spouse who is still working? The gap between those two figures is what your portfolio has to produce. That is your number, and almost nothing we recommend makes sense until we have it.
Once we have that information, we can determine how much risk you actually need to take to reach your goals. Money you need within months does not belong in the stock market, and money you will not touch for twenty years should not be sitting in cash losing ground to inflation.
The first plan gives us a starting point. It shows where you are today, where you want to go, and what it will take to get there. Then we keep it current. Once you retire, we update the plan annually so we can identify when real life begins to diverge from it.
We also build on conservative assumptions. We project future returns well below what your portfolio has actually averaged. We assume Social Security cost-of-living increases come in lower than they have historically, and that inflation runs higher. And when you tell us what you expect to spend each month, we mark it up.
Conservative assumptions give the plan room to absorb results that fall short of historical averages. When returns or Social Security adjustments exceed our projections, the plan may show additional flexibility.
The opposite is also true. If the assumptions are too optimistic, the plan can look good on paper while materially understating the risk of falling short, and some people are forced back to work. There is nothing wrong with a part-time job in retirement. It ought to be because you want one, not because the plan needed you to have one.
The Retirement Reservoir™
The Retirement Reservoir™
SHORT TERM
INTERMEDIATE
LONG TERM
RETIREMENT PAYCHECK
LEGACY
1-3 years
years 4-9
years 10+
overflow
How We Get There
The Retirement Reservoir™
Reservoir One · Years 1–3
Short Term
This reservoir holds your first three years of spending, set aside before you need it. It is nearly all bonds and cash, built on individual Treasury bonds laddered to mature in one, two, and three years, alongside bond ETFs. The small remainder sits in the most defensive corners of the stock market.
It matters that this sits apart from your checking account. Checking pays close to nothing in interest, and money sitting in easy reach has a way of getting spent.
Reservoir Two · Years 4–9
Intermediate
This second reservoir holds the next six years of spending, balanced between stocks and bonds. It has more time to work with than the short reservoir, so it can take on more risk.
But every dollar here is still money you are going to spend within the decade, and that sets a ceiling on how much risk belongs in it.
Reservoir Three · Years 10+
Long Term
This is the reservoir where long-term growth is the primary goal. This strategy is most responsible for managing longevity risk, the odds of running out of money too early.
It can accept more market risk because nothing is drawn from it for at least a decade. A ten-year time horizon provides substantially more opportunity to ride through a market decline, although recovery is never guaranteed.
A Crucial Decision
Social Security is more than a break-even calculation
Most advisors begin with a break-even analysis. It compares claiming at 62 with waiting until 70 and identifies the age at which the larger delayed benefit makes up for the earlier payments you did not receive. The calculation is useful, but it leaves out several factors that can materially affect the decision.
We build the claiming decision out of your situation. We start with your benefit and your spouse's. We look at what else you can draw on while you wait, and what it costs the portfolio to bridge those years. We talk about your health, because that changes the answer more than anything else on the list. And we account for what current projections say about the Social Security trust fund.
Then there is the survivor decision. When one spouse dies, one of the two Social Security payments ends. Because the surviving spouse generally retains the larger available benefit, an early claiming decision by the higher earner can reduce the survivor’s income for the rest of their life.
The Depth Behind It
Then the real planning starts
Income and Social Security
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Claiming strategy for you and your spouse, including the survivor decision
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Required minimum distributions and what they will do to your taxes, whether you need the money or not
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Healthcare coverage and costs between retirement and Medicare eligibility, when applicable, and how they affect the rest of the plan
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Insurance and annuities you already own. Whether they are structured correctly, whether they still fit the plan you have now, and whether you are paying for something you no longer need
Taxes
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Roth conversions planned year by year inside a target bracket, not done all at once
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Multi-year tax projections that account for IRMAA thresholds and their potential effect on Medicare premiums
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The widow's tax trap
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Asset location across taxable, tax-deferred, and Roth accounts
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Tax loss harvesting and the 0% long-term capital gains bracket
Estate and Legacy
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Estate documents, beneficiary review, and trust coordination
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Charitable giving through QCDs, donor-advised funds, and appreciated stock
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Education funding for children and grandchildren
While You Are Still Working
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Mega backdoor Roth and after-tax 401(k) contributions
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Equity compensation and business owner exit planning
None of these decisions should be evaluated in isolation. A Roth conversion that makes sense by itself can push you into a higher Medicare premium bracket and pull more of your Social Security into taxable income. The plan helps us determine the appropriate sequence. We have built more than 500 financial plans. Will Allen holds the Chartered Retirement Planning Counselor (CRPC®) designation. Jonathan Brummel also builds retirement plans, and he does the tax projections, the claiming analysis, and the conversion sequencing. Between the two of us, that is forty-five years in this business. Some of what a plan requires we do not do ourselves. An attorney drafts the estate documents, a CPA files the returns, and Medicare comes with its own rules and deadlines. We have people for all of it. We do not accept referral fees, and we do not pay them.
The First Year
Learning to spend it
For many people, the biggest challenge in retirement is spending too much. When someone is spending ahead of the plan, we look to catch it early, while a small course correction is all it takes.
The opposite problem gets discussed far less. Plenty of our clients spend too little, and that is understandable. You spent decades earning a paycheck and saving as much as you could. Now both have stopped, and for the first time in your adult life the money is moving in the other direction. Every instinct you built along the way is telling you to be careful.
That adjustment is harder than people expect. We work through it with you, and for most clients it gets easier each year.
I've been with Sentara Capital for 2 years. This company offers exceptional, personal service and a unique perspective on the financial world you won't get anywhere else. If you're looking for some real expertise about growing your nest egg, planning for retirement or sound investment advice, look no further than Sentara Capital.
- Ernie Garland
Client Review
Sentara Capital, LLC is the best. We were extremely impressed with their knowledge and strategy in providing financial security and growth for our retirement.
- Beverly Larsen
Client Review
The Hard Years
The Steady Hand
Every client eventually has a year when not much goes right financially, and sometimes a market decline is part of it. A roof and a car in the same twelve months. A medical diagnosis. An adult child who needs help, and you were never going to say no.
In a year like that, you are not facing it alone. We already know you and your numbers. Our job is to keep one bad year from changing your retirement.
Your Next Step
Start with the questions that actually matter.
We would rather start with a conversation than a form. Tell us what you want retirement to look like, the things you have always wanted to do, and who you would like to take care of. That is when we get to work.
Planning sets the spending number. See how we build the portfolio to accommodate that.
Planning strategies discussed here are general in nature and are not personalized advice. Portfolio positioning is approximate and varies by client circumstance. The Retirement Reservoir is a planning framework shown for illustration only and is not a guarantee or projection of future results. Tax, estate, and insurance outcomes depend on individual circumstances and on current law, which is subject to change. Sentara Capital does not provide legal or tax preparation services. Social Security projections rely on assumptions that may change, including future legislative action. All investing involves risk, including the potential loss of principal.
CRPC® is a registered service mark of the College for Financial Planning.