Personal Finance for Long-Term Investors - The Best Interest · Jesse Cramer

Is 2026 Your Year to Retire? (AMA)

·51 min·1 clip

The first year of retirement carries more sequence risk than any decade before it—bad markets in early years damage your long-term retirement success far more.

This AMA episode from "The Best Interest" podcast features host Jesse Kramer, a fiduciary wealth manager and blogger, answering listener questions about New Year's financial planning. He focuses on retirement readiness, introducing kids to investing, and adjusting portfolios over time. The first question comes from Jim in Minnesota, who is concerned about high market valuations and sequence of returns risk as he considers retiring in 2026. Kramer references an article he wrote in November 2025 addressing whether retirees should sell stocks and move to cash, citing finance professor Aswath Damodaran's distinction between "overvalued" and "overpriced." He notes the S&P 500 returned 22.5% annually over the previous 35 months and 15% annually since 2017, acknowledging current high valuations in stocks like NVIDIA and Apple. Kramer outlines rational reasons to consider moving to cash, including risk reduction, rebalancing a portfolio that has drifted from 60-40 to 70-30, and asset-liability matching for those with "excess capital." He also mentions cash yields around 3.5% and the psychological safety it can provide to prevent poor behavioral reactions during volatility. Conversely, he argues market timing is notoriously difficult, citing that even if you sell 10% of stocks and perfectly time a 40% drop, you only save your portfolio 4%. Kramer references Howard Marks's observation about markets obsessing over single topics, like the current "AI bubble," comparing it to past fixations on Silicon Valley Bank or NFTs. He offers seven tips for those on the fence, such as tying the decision to a timeline (e.g., moving one year of expenses to cash) and keeping any changes small. On sequence risk, Kramer cites Wade Pfau's research showing the first six years of retirement carry the most risk, with the first year being the most critical. He suggests building a buffer of six months to a year of cash, followed by several years of short-duration bonds, to cover spending during this risky window. Kramer identifies accurate spending tracking as a major pitfall, warning that people often underestimate their expenses by 25% or more, similar to underestimating calorie intake. He also highlights non-financial risks in early retirement, like losing social connections and purpose, directing listeners to episode 106 for a deeper dive. The tone is educational and conversational, blending practical numerical analysis with behavioral psychology insights. This episode is ideal for listeners nearing retirement who are anxious about market conditions and seeking a sober, planning-focused perspective. It may be less useful for those seeking hot stock tips or definitive answers on market timing.

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