Client Deliverables
Selling into the storm.
The danger isn't a market crash. It's being forced to sell during one to pay the bills. That's sequence-of-returns risk — and it's why a portfolio that "works on average" can still break if the bad years arrive early. This examination maps a portfolio against historical crash analogues to see whether the income holds, and whether a cash reserve absorbs the shock.
The question we actually answer
A retirement or income portfolio lives or dies on what happens when a downturn lands while the household is drawing on it. If income still covers spending, no holdings are sold at the bottom and the portfolio recovers intact. If income falls short, the household must liquidate into a decline — locking in losses at the worst possible moment. We replay four historical crash analogues, apply the same drawdown to the portfolio, and check the coverage ratio in each — then test whether a dedicated cash reserve covers any gap.
Across four historical crash analogues, income coverage stayed above 1.0× in three. In the worst — a tech-led bust — coverage dipped just below 1.0×, and a three-plus-year cash reserve covered the small gap. The plan bends; it doesn't break. The reserve is the difference between bending and selling.
| Analogue | Drawdown | Coverage of spend | Verdict |
|---|---|---|---|
| Tech-led bust | ~−53% | ~0.92× | Bends |
| Global financial crisis | ~−36% | ~1.45× | Holds |
| Pandemic shock | ~−23% | ~1.78× | Holds |
| Inflation drawdown | ~−22% | ~1.74× | Holds |
Illustrative. Coverage = after-tax portfolio income ÷ spending need during the shock. The single sub-1.0× case falls short by a small margin covered by a cash reserve sized to three-plus years of spending. Analogues are historical reference points, not predictions. Not a recommendation of any allocation.
"The cash bucket exists for exactly one job: so you never sell at the bottom."
How the examination is built
- Pick real analogues. Four distinct historical downturns — different causes, different depths — rather than one tidy hypothetical crash.
- Apply the drawdown. Each analogue's decline is applied to the portfolio to estimate the balance and income at the trough.
- Test coverage at the trough. The coverage ratio is computed in the worst moment, not the calm average — that is where sequence risk lives.
- Bring in the reserve. Any shortfall is measured against a dedicated cash reserve to see whether it prevents a forced sale.
- Label bend vs. break. "Bends" means the reserve carries the gap; "breaks" would mean forced liquidation — and we say which is which.
What this examination is — and is not
This is a stress test of income coverage against historical downturns. It is not a forecast of any future crash and not a recommendation of any allocation or reserve size. It shows where a plan would bend, where it would strain, and what role a cash reserve plays — so the household can judge its own margin of safety.
Want this checked against your actual account?
This examination shows one way money can quietly leave a portfolio. If you want us to examine what may be happening in your actual accounts, request a confidential fee review.
Related examinations
The Deployment Examination — Whether to invest a large sum all at once or ease it in — and why deploying all at once beat spreading it out roughly 70% of the time historically.
The Windfall-Structure Examination — How a windfall-structuring framework guards against the predictable human mistakes that lose most large sums.
The Tax-Alpha Examination — Re-testing an advertised “tax alpha” figure — computed at the top tax bracket — at a household's actual bracket.