Over 55 with a fat portfolio and ready to retire? A crash could torpedo those plans — how to ditch the rat race and protect your wealth

The S&P 500 is up almost 13% year-to-date in 2026. Much of this gain is fueled by the buzz in AI, with a recent Reuters report saying most U.S. third-quarter earnings gains are expected to be driven by AI-related companies.

On the flip side, prominent financial analysts and institutions have issued direct warnings that an overheating AI market could burst and trigger a major stock market crash.

Speaking with Bloomberg, Panmure Liberum Strategist Joachim Klement said, “my core conviction is that the AI bubble will either burst in 2027 or in 2028.” He said this because he believes hyperscalers have severely depleted their free cash flow, while the cost of debt keeps rising.

While predictions are not reality, it is important that you ditch the rat race before it is too late, whether you want to retire early or at your retirement age. Here’s what you can do to protect your wealth.

Beware that markets can drop in the early years of retirement

The timing of when the market drops can significantly affect your average gains. And If stocks crash right after you retire, you could run out of money much faster — even if the market recovers later. This pitfall is called the “sequence of returns risk.”

For example, a new retiree may need to dip into their portfolio to pay monthly bills. But once those funds are liquidated during a market crash, it becomes hard to recover even when stocks rise again because there is less money there to grow.

On the other hand, the same market crash that poses significant financial danger to new retirees can be a blessing for active workers, who can buy more stocks at “a discount” and have time to wait for the market to recover.

The Fix? Sort your money by when you’ll need it

Luckily, there’s a defense move against the sequence of returns risk that is widely recommended by financial planners. It’s called the bucket approach and was originally created by wealth manager Harold Evensky in 1985, according to Advisor Perspectives.

Christine Benz, director of personal finance and retirement planning at the investment research firm Morningstar and author of “How to Retire: 20 Lessons for a Happy, Successful, and Wealthy Retirement,” has built much of her work around it.

She wrote in March 2025 that the strategy involves separating near-term living expenses into one bucket of cash and small-yield investments, while assets that aren’t needed for a long while go in a pool of long-term holdings.

She then went on to introduce her own 3-bucket version of the strategy:

Bucket 1: This holds one or more years of living expenses in cash, in high-yield savings accounts or short-term bonds. In an interview, Benz calls cash “the only asset that is guaranteed to have a positive return” over a short stretch.

Bucket 2: This should hold roughly five to eight years of living expenses in high-quality fixed-income investments like short- and intermediate-term bonds, with a small portion allocated to highly reliable dividend-paying stocks. You can also take some of the yields from this bucket and put them in bucket 1.

Bucket 3: This is for long-term growth. Its funds are allocated in a globally diversified stock portfolio meant to be left untouched for a decade or more.

Don’t just drain the buckets top to bottom

A common practice is to simply “spend through the buckets” in order, emptying cash first, then bonds, then stocks. Benz warns against that, and wants retirees to stay “opportunistic,” reading the market each year before deciding where their cash should come from.