# The annual review: the retiree's checklist The plan is written ([[building-your-plan]]). Now it has to stay alive for forty years. This book's cruising speed fits in one sentence: one real session a year, and **nothing** in between unless a written threshold is breached ([[when-to-worry]]). The annual review is the only appointment where the plan is allowed to change. That is its strength. Every decision gets made there, while calm, on a fixed date, with both of you, far from the headlines. Which is why it deserves a full procedure rather than a vague intention. This chapter is that procedure. The complete checklist runs to seven blocks: the numbers, the rule as written, the portfolio, taxes and paperwork, the protections, the couple and its governance, and the non-financial line. Each block comes with its exact moves and an honest running time, two to three hours in all. (A retiree who spends weekends on this has a problem that belongs to another chapter, [[the-psychology-of-spending]].) It also covers the traps of the ritual itself: tinkering dressed up as rigor, and the yearly renegotiation of what was already settled. And the calendar, because January is not picked at random. ::: cle The doctrine of the review The review **records** and **executes**. It does not redesign. The plan was designed once, while calm, on the weight of the evidence ([[building-your-plan]]). The review checks that reality is still inside the lines. It runs whatever written rule has fired. It updates the numbers that move: spending, pensions, taxes. And it reopens a design decision only on a **major** new fact, with the anti-goalposts clause standing guard ([[one-more-year]]). The test of a good review: if nothing unusual happened, it changes almost nothing. That is a success, not a letdown. ::: ## The calendar, and getting ready **The date** is fixed, written into the plan. Early January has three virtues. The tax year is closed, so the real numbers exist. The indexation of the withdrawal lines up with the inflation actually recorded ([[fixed-inflation-adjusted-withdrawal]]). And the tax choices you will file in the spring can be prepared while there is still time to act on them. **Getting ready** takes an hour, before the session. Export the balances account by account. Pull the year's real spending from your aggregator or your statements. Print the latest pension statement if the year added to your record. And reread **the page**: the session is run with the plan in hand. ## The date is not neutral, and a review is not a withdrawal Two points deserve their place ahead of the checklist. Both can be measured, and both are almost always confused. **The date of the check is a lottery draw.** An annual review means reading the state of the world on one given day. And as soon as the rule has thresholds, that day decides. Take the 518 thirty-year windows of this book's real 60/40, run a guardrail policy over them, and change **nothing** but the month of the annual check. On a market path that is rigorously identical, ending capital moves by 5% at the median across the twelve possible dates, and by as much as 15%. Average income moves by 2%. The leanest year moves by 10% at the median, and by as much as 21%. Two twin households, same portfolio, same written rule, one checking in February and the other in April, do not live the same crossing, the same years spent inside a hostile market. Nobody did anything differently. Only the calendar spoke. The defense is not to check obsessively. It is to **defuse the date**, and two techniques are enough. The first is to check more often while rescaling the moves, so that a breach lasting a full year delivers the same annual intensity: a 10% cut per year becomes 0.87% per month. The median outcome then does not budge, which is reassuring, but the leanest year rises by about 3.5% and the lottery disappears. The second is the hysteresis of risk-based guardrails, which demands two breaches in a row ([[morningstar-guardrails]]). It filters the same noise without touching the cadence, and it stays runnable by hand. The point to hold on to: review frequency is **not** a performance lever. Checking four times a year makes no money. It only makes the result less hostage to an accident of the calendar. **An annual review does not mean an annual withdrawal.** That is the expensive confusion. The review is a decision, the withdrawal is a cash operation, and nothing says the two must run on the same clock. Taking twelve months of spending out in January leaves 5.5 months of your standard of living idle on average, about 1.8% of capital, sitting out of the market all year. Over the same 518 windows, that costs roughly 3.7% of ending capital after thirty years and **doubles** the number of paths that end in ruin; a quarterly rhythm already costs 0.7%. Paying 2% real on the idle cash erases only a quarter of it. So the right setup never varies: one decision a year, one transfer a month ([[the-psychology-of-spending]] gives the other reason to pay yourself monthly, and it is the decisive one). ## Block 1: the numbers as they are (20 minutes) The year leaves four findings, written into the plan log. Three lines a year is enough, and in ten years that log will be worth a great deal. **Spending** first, real against budget: does the gap explain itself? Underspending needs treating too ([[the-psychology-of-spending]]), so check whether the fun budget got spent. Then the **portfolio**: value and real return, recorded and not judged, because a single year is noise ([[reading-a-fan-chart]]). Then the **current withdrawal rate**, spending divided by the portfolio. It is the main warning light, to be placed on the plan's green-amber-red scale ([[when-to-worry]]). Last, the year's **inflation**, the published index plus your own drift ([[tracking-inflation]]). It sets the indexation of the withdrawal per the rule, freeze included if the year came in red. ## Block 2: the rule, executed (20 minutes) This is the mechanical heart: run **what is written**. Indexation first, or its freeze. Then the rule's thresholds. Risk-based guardrails call for a fresh simulation every year, and this is where a simulator earns its place. Recompute central-case failure probability on today's numbers, compare it with the written thresholds, and confirm across two reviews before any cut or raise ([[morningstar-guardrails]]). Then the monthly transfer, adjusted to its new amount. And for the actuarial rules, the repricing ([[amortization-based-withdrawal]]: wealth, horizon minus one, today's expected return). The trap in this block is using the session to "test a few other rules". No. A rule changes on a major new fact, never on one year of performance ([[choosing-your-strategy]]). You **never** change rules in a drawdown, and rarely outside one. ## Block 3: the portfolio (30 minutes) Three moves. **Band rebalancing** first: measure the drifts against the plus or minus 5 point bands, then correct them by pointing the coming months' withdrawals at whatever is overweight, and by trading if that is not enough, starting in the accounts where a sale costs no tax ([[stock-bond-allocation]]). Then the **bond tent**, moved forward one notch if the plan calls for one, by its yearly step ([[glidepaths]]). Last, **holding hygiene**: tracking difference, fund size and fees, the low-effort watch ([[building-it-with-us-etfs]]). You switch only on real deterioration, with the tax cost computed first. And then the move you do **not** make: no allocation change on a market view. The allocation is a design decision. The plan's dials move at phase transitions, such as pensions being claimed ([[horizon-and-life-expectancy]]), not with the mood of the year. ## Block 4: taxes and paperwork (30 minutes) A yearly pass on the tax code and the filing cabinet, all of it concrete moves. **Harvesting** for the year ahead comes first: the program of realizations, gains taken up to the top of a low bracket wherever your rules reward it, losses harvested where they are worth harvesting, and every threshold that a larger realized income would trip kept in view ([[us-taxes-in-the-withdrawal-phase]] works the American version out bracket by bracket). Then the choices your return will force on you, prepared now, while you can still act on them. Then ten minutes of **watching the rules**: what changed this year in the tax code, in the pension system, in the accounts you hold. The dated chapters of this book are that checklist. And last, the paperwork of continuity: beneficiary designations and the letter of instructions, reread one year in three, and after every family event. ## Block 5: the protections (15 minutes) A tour of the shock absorbers. The **buffer** first: level against target, and were the flow rules actually followed this year? Schedule the refill if the buffer sits below target and you are not in a drawdown; retire it if year E has arrived ([[refilling-the-buffer]]). Then the **ladder**, measured again: the rung just consumed, the next one checked, the realized inflation folded in ([[bond-ladders]]). **Insurance** next: is the term life policy still doing a job? Health coverage gets shopped again when its 3 to 5 year cycle comes due. Last, the named **margins**, verified once more: did you keep your skills current this year? Is the side business still breathing ([[going-back-to-work]])? ## Blocks 6 and 7: the couple, and the non-financial line (30 minutes) The session is run by **both of you**, and these two blocks are the reason ([[couples-and-family]]). The **reverse quiz** first: the one who does not manage the money walks through "here is what I would do if". That is the real governance deliverable of the year. Then the **life decisions** that touch the plan: projects, family, the line that runs from the children to the parents. Last, the **non-financial line** ([[meaning-and-identity]]): "how are the four workstreams doing?", structure, identity, connection, usefulness. Thirty seconds each, worth as much as the rest of the session. The plan funds a life, and the review checks on the life too. ::: attention The traps of the review itself **Four** ways the ritual goes wrong. - **The tinkering review.** The session becomes the yearly excuse to touch everything up, a tilt here, a holding there. That is the optimizer's drift ([[meaning-and-identity]]), and the plan log exposes it. If every review changes three things, the plan is not being flown. It is being fiddled with. - **The renegotiation review.** Reopening the rate, the rule, the criteria, everything that was settled, year after year. The anti-goalposts clause applies here too. - **The trial review.** Putting the plan, and the spouse who manages it, on trial for the **year's** performance. One year is noise. A plan is judged on its warning lights, and on the scale of its phases. - **The skipped review.** "Everything is fine, no need this year." That is the year the reverse quiz rusts, the beneficiary designation goes stale, and the drift settles in. A calm year's review still takes ninety minutes. That is its floor price, not an option. ::: ::: exemple Three years of the review log From Aline and Thomas's log ([[building-your-plan]]). - **Review 2031, a calm year.** Current withdrawal rate 3.4% (green), indexation +2.1%, rebalanced through the withdrawals. Harvesting: $9,200 drawn tax free and $14k of gains realized inside a low bracket. Buffer full, reverse quiz passed. The travel budget went unspent, so a trip was booked on the spot. Time: 1 hour 50. - **Review 2033, a red year, −19%.** Current withdrawal rate 4.6% (amber), indexation **frozen** by the rule. Seven months drawn from the buffer (the drawdown passed 18%, exactly as written). Guardrail resimulated: failure probability 11%, under the 13% threshold, so **no** cut, and a first year on watch. **Nothing** else changed. The session mostly consisted of doing nothing that was not already written down. Time: 2 hours 10. - **Review 2034.** The market has recovered, the rate is back to 3.9%, the buffer refilled out of sales made in calm weather. Failure probability resimulated at 6%, watch lifted. Beneficiary designations reread (the three-year cycle). Non-financial line: Thomas is bored less often since he joined the chess club. Three years, six hours of flying the plan in all. That is **everything** a good plan asks for. And every line of the log was already provided for on the plan's one page. ::: ## The essentials - One real session a year, on a fixed date (January, for the closed tax year and the indexation), with **both of you**, plan in hand. Nothing in between beyond a written threshold breached: the review records and executes, it does not redesign. - The seven blocks: the numbers as they are (the current withdrawal rate on its scale included), the rule executed (indexation, thresholds resimulated, confirmation across two reviews), the portfolio (bands, tent, hygiene, never a market view), taxes and paperwork (the year's harvesting program, the dated watch), the protections (buffer, ladder, insurance, margins kept alive), the couple (the reverse quiz), and the non-financial line. - The date of the check stops being neutral the moment the rule has thresholds: on an identical path, changing nothing but the month of the review moves the leanest year by 10% at the median. You defuse it by checking more often with rescaled moves, or through hysteresis, never by hoping the calendar will be kind. - An annual review is not an annual withdrawal: the decision is annual, the transfer stays monthly. Pulling twelve months of cash in January costs about 3.7% of ending capital over thirty years and doubles the number of ruined paths. - An honest running time is ninety minutes to three hours. The three-line yearly log is the valuable byproduct. It also exposes the drift, because a tinkering review shows up in its own log. - The traps of the ritual: tinkering, renegotiation, putting the year on trial, and skipping the review in calm years. Its floor price is ninety minutes, always. - The best review of a normal year changes almost nothing. That is the proof the plan is working: the real decisions were made once, while calm, and that is exactly why they hold. --- ## Going further - The plan template and its log: [[building-your-plan]]. The thresholds that fire between reviews: [[when-to-worry]]. Flying through a storm: [[bear-markets-in-retirement]]. - The specialized blocks: [[refilling-the-buffer]] (the buffer), [[couples-and-family]] (the reverse quiz), [[meaning-and-identity]] (the non-financial line).