Rebalancing in the Distribution Years: Same Rule, Different Job.

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At age 62, Michael and Karen each retired with similar portfolios and similar allocations. Each had roughly 40 percent in growth assets, consistent with the Rule of 100. On paper they looked identical. Michael’s portfolio, however, was blended — growth, income, and stability mixed together in the same accounts, drawn down proportionally. When markets declined, his withdrawals continued proportionally too, and each downturn forced him to sell assets he had hoped to hold for years. Volatility quickly became personal. Karen’s portfolio was structured differently. Her foundational income was secured elsewhere. Her Walls insulated the volatility. Her growth assets lived behind that structure, untouched during market stress. When markets declined, nothing needed to be sold. Time remained available.

Both followed the Rule of 100. Only one of them experienced it as intentional. Michael and Karen are fictional, but the difference between them is the subject of this post — because July is when most households sit down with six months of statements and ask whether the portfolio still looks the way it is supposed to. The answer depends on what you think a rebalance is for.

What the Rebalance Was Doing Before — and What It Does Now

During the accumulation years, rebalancing is maintenance. Sell a little of what grew, buy a little of what lagged, and let the next contribution do most of the work. Mistakes are recoverable. Time absorbs them. Income arrives from a paycheck, not from the portfolio, so the only thing a rebalance has to get right is the ratio.

Retirement reverses the plumbing. The contributions stop and the withdrawals begin, which means the withdrawals are now the rebalancing event whether anyone planned them that way or not. Every dollar that leaves the portfolio comes from somewhere, and if it comes proportionally from everything, then a decline in the growth sleeve is locked in by the very act of paying for groceries. That is sequence-of-returns risk in its mechanical form: selling a larger percentage of shares at lower prices reduces the capital base that participates in recovery. Even modest differences in early liquidation can materially change sustainability over a 25- to 35-year retirement.

So the question a retiree’s rebalance must answer is no longer what percentage goes where. It is the question the REGAL Stronghold™ is built around: what is each dollar responsible for when conditions are imperfect?

The Rule of 100, in Context

The Rule of 100 is a simple guideline: subtract your age from 100, and the result suggests an approximate percentage of assets that might reasonably remain in growth-oriented investments. A 60-year-old lands near 40 percent; a 70-year-old closer to 30. Used thoughtfully, it acknowledges a basic truth — as time horizons shorten, fewer assets should be exposed to volatility that could disrupt lifestyle or confidence.

The rule is often misread as an instruction to become conservative because of age. That misses the point. The rule is about relieving growth assets of responsibilities they were never meant to carry indefinitely. As retirement approaches, growth assets should no longer be responsible for funding essential income, stabilizing emotions during downturns, or absorbing short-term shocks. Growth remains important — but it must be positioned where volatility is survivable and patience is possible. When risk is asked to do everything, it eventually fails at all of it. Risk must be earned, not assumed.

Two clarifications make the rule usable inside the Stronghold. First, as the framework applies it, the rule sizes the Battlement — the assets held purely for growth and optionality — while the remainder lives in the Foundation and the Walls. Second, that remainder does not sit still. Walls assets fluctuate: dividend equities and real estate among them. What separates them from the Battlement is that they pay you while they fluctuate, and that income is what lets you wait out a decline instead of selling into one. But dividend equities in the Walls are still equities. When you measure your total exposure to the market, count them.

Why Architecture Beats Allocation

Michael and Karen’s allocations matched. The difference was architecture. One embedded risk throughout the portfolio, forcing decisions at the worst moments. The other contained risk in places where volatility is tolerable and recovery time exists.

Consider how this plays out in a household drawing $120,000 a year, with $80,000 covered by foundational income and $40,000 required from the portfolio. If the entire $40,000 must be withdrawn from growth assets during a 25 percent early decline, share depletion accelerates. If instead $25,000 is generated by income-producing assets in the Walls and only $15,000 requires liquidation, fewer shares are sold at depressed prices. Long-term averages may look identical. Sustainability may not. Durable income does not eliminate sequence risk. It reduces withdrawal drag — and withdrawal drag is what a distribution-phase rebalance is managing.

This is also why the familiar accumulation-era habit of “sell winners, buy losers” needs translation. In retirement, the winners in a strong year are the natural source for replenishing the reserve and the Foundation — raising the drawbridge in calm weather, so that the next decline finds the essentials already funded. The losers in a weak year are precisely the assets the structure exists to leave alone.

What a Distribution-Phase Rebalance Actually Checks

Check one: the direction of cash. Dividends, interest, fund distributions, and required minimum distributions are rebalancing tools before they are income. Directing them toward whichever layer is underweight — rather than automatically reinvesting into the asset that produced them — accomplishes much of the rebalance without a single sale, and without a single taxable gain in a brokerage account.

Check two: the reserve. The accessible reserve that funds the unexpected — a repair, a care need, a gap year — is spent by decision and refilled by design. After a strong first half, the question is whether gains in the Battlement should refill it now, while prices are favorable. After a weak one, the question is whether the reserve and the Walls can carry spending long enough to avoid selling growth assets at all.

Check three: the overlap. A statement full of familiar names can conceal an unfamiliar risk. Several holdings may depend on the same industry or the same economic conditions. Different funds may own many of the same companies. What appears to be a row of separate supports may be one support counted several times. The time to ask is before a difficult period reveals the answer: if one source weakens, what else weakens with it?

Check four: the location. Where a rebalance happens matters as much as what it moves. Inside an IRA, repositioning carries no capital-gains cost. In a taxable account, the same trade may realize gains — or, in a down year, losses worth harvesting. Where a required distribution is due anyway, taking it from the overweight sleeve turns a forced withdrawal into a rebalance the Tax Kraken™ was going to demand regardless.

Check five: the behavior. Volatility itself is rarely the primary threat in retirement. Behavior is. When retirees must sell during downturns, stress increases; stress leads to reactive decisions; reactive decisions compound sequence damage. A structure that keeps the growth sleeve out of the monthly withdrawal is not just better mathematics. It is a behavioral guardrail, and for couples who experience risk differently it is often the thing that keeps the dinner-table conversation from becoming the plan.

The Opposite Mistake

As retirement approaches, many investors respond by reducing risk aggressively. Portfolios are simplified. Growth is constrained. Stability becomes the priority. That instinct is understandable — and incomplete. Eliminating risk entirely creates a different danger. Inflation erodes purchasing power. Longer retirements strain fixed income. Flexibility narrows. Legacy goals quietly weaken.

Inflation deserves particular mention because it strengthens every Foeman over time. No single layer of the Stronghold defeats it. The Foundation provides stability but may not grow with costs. The Walls offer adaptive income through dividend growth, rental increases, and bond reinvestment. The Battlement preserves the long-term growth potential intended to help outpace rising prices. A rebalance that strips the Battlement to zero in the name of safety has not eliminated risk. It has moved all of it to the inflation line, where it compounds quietly for decades.

The Mid-Year Self-Assessment

Risk questionnaires ask how you would feel if investments fell by a certain percentage. A percentage becomes more meaningful when it is tied to a decision. If the decline came next month, would ordinary spending need to change? Would you postpone a purchase, reconsider a gift, or draw on a different account? Couples often discover a difference here. One may accept fluctuations while the other experiences them as a threat to the life they have planned. A technically defensible plan that one person is constantly tempted to abandon needs further discussion — and usually needs a thicker Foundation, not a braver spouse.

The Principle Underneath

The Market Dragon™ does not attack constantly. It rests near the Stronghold Walls during long periods of calm, and when markets rise steadily it appears tame, even beneficial. The danger is not the Dragon’s strength — markets have always fluctuated. The danger is being forced to act while it is awake. A distribution-phase rebalance is the work done while it sleeps: assigning each dollar its job, refilling what the next decline will call on, and making sure that when the Dragon stirs, the household is not the one that has to feed it.

The Rule of 100 points in the right direction. The structure decides whether the plan holds. Michael and Karen had the same number. Only one of them could leave it alone.