"The first order of business is to eliminate catastrophes -- those red dots. We can't avoid red dots when we fund retirement with an equity portfolio because even good returns on average can fall victim to an unfortunate sequence of returns. We can, however, make red dots non-catastrophic by building a floor of safe income with TIPS bond ladders, Social Security benefits, fixed annuities and the like to insure that we can meet our non-discretionary spending needs. Then, even if our equity portfolio becomes a red dot, we don't lose our standard of living."

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