Twenty years out and five years out are different problems

Treat the sections below as a sequence. With time horizon and pension decisions, getting the early decisions right makes the later ones much easier.

The same fall means two different things

A sharp fall in value twenty years before you need the money is a period you live through with contributions still going in. The same fall two years before you stop working removes options, because there is no longer time for a recovery to arrive before you draw. That difference is about time rather than about the size of the fall, and it is why the question changes as you age.

Nobody can say how long a recovery takes, and history offers ranges rather than guarantees. The general principle that shorter horizons reduce your capacity to absorb a setback is not seriously contested.

Most default arrangements already do something about it

Many workplace default funds shift automatically toward less volatile holdings as the member approaches a target retirement date. This happens without any instruction from you, which is convenient and depends entirely on the date the scheme holds being correct. Someone who intends to work five years longer than their scheme assumes may be de-risking on a schedule that does not suit them.

Someone who intends to stop earlier may be exposed for longer than they realise. Checking the target date on your statement is administrative rather than an investment decision, and it is worth doing this year.

Stopping is no longer a single date

The old model of one date on which everything changes has largely been replaced by a phased reduction over several years. That extends the effective horizon, because money you will not draw for another fifteen years is still long-term money at sixty. It also complicates the picture, since different parts of a pot are effectively being held for very different periods.

For most people, thinking in terms of when each portion is needed, rather than one retirement date, describes most people's situation more accurately. How to act on that is squarely a question for regulated advice, because it depends on your circumstances and your jurisdiction.

The years just before and just after are the exposed ones

The period immediately around when you begin drawing is when a household is most sensitive to a fall, because withdrawals and losses coincide. This is widely discussed among advisers and is one of the main reasons people hold a cash reserve going into that period. Having somewhere to draw from that is not affected by a market fall is what buys the time to wait.

The size of that reserve depends on individual circumstances and there is no single correct answer to it.

The point worth carrying is that the risk is concentrated in a few years, not spread evenly across retirement.

Being behind changes the calculation both ways

Someone who has contributed little and is close to retirement faces a genuine conflict between needing growth and being unable to absorb losses. Taking more risk to catch up is exactly the strategy that fails worst when it fails, because there is no time left.

The useful part is this: the alternatives are unglamorous: contribute more, work longer, spend less in retirement, or some combination of the three. Advisers generally point to those levers first precisely because they are within your control and returns are not. Anybody in this position should be talking to a regulated adviser rather than acting on general reading.

Review the question, not just the balance

People check the balance regularly and almost never ask whether the arrangement still matches how far away they are. A once-a-year review that asks when you now expect to stop, and whether the scheme knows, catches most of the drift.

For most people, life events move that date substantially, including a career change, a caring responsibility or a health diagnosis. Updating the scheme after such an event is a small task with a large effect on an automatic arrangement. The balance will do what it does; the horizon is the part you can actually keep accurate.

The takeaway

Check the retirement date your scheme holds; an automatic arrangement is only as good as that one field.

Pick the one that costs you least, and let the rest wait.