A common heuristic in determining this is to assume your annual retirement expenses will be 80 percent of your salary. Indeed, rigorous studies dating back to the 1980s support this assumption.

Read: Will the 401(k) MEP become the penicillin of retirement?

Unfortunately, retirement spending is not a straight-line graph. Neither, surprisingly, is it upwardly sloping.

Most people in fact spend larger amounts during the first years of retirement. After that, they begin to spend less as the urge (and ability) to participate in more expensive activities declines.

So, it’s not unusual to see spending at 85 percent of the salary in the first decade, then tail off to 75 percent (or less) in the subsequent decades. (Remember, you need to assume you’ll be spending another 30 years in retirement – that’s three decades!)

Using the 80 percent haircut might be useful early on when you’ve just started saving for retirement, but by the time you hit the five-years-to-go mark, you probably ought to start sharpening that 80 percent pencil.

As you approach retirement, the concept of “retirement” begins to crystallize. No longer is it a theoretical construct. It becomes clearer exactly what you’ll be doing during at least the first few years of retirement.

You begin considering your preferred post-retirement places to live. You start collecting travel brochures and contemplate possible itineraries. Fortunately, all these activities come with well-defined price tags. This all helps you get a firm grasp on your likely annual retirement expenses, at least for the first few years of retirement.

And that’s key. Once you’ve got a good idea how much money you’ll be spending in the initial two to three years of your retirement, you now have a target. But a target for what?

This is where organic asset allocation comes in.

Retirees must deal with two opposing factors. First is the reality (mentioned earlier) that they need to prepare to live for another thirty years after retirement. That means “retirement” is not some imaginary delimiting line where investments suddenly morph from long-term growth to short-term safety. No.

The bulk of the assets must remain invested for long-term growth. Any allocation that includes assets other than stocks conflicts with this need.

On the other hand, the potential damage of unfortunately timed market volatility is very real. Very few people can “self-endow” and live off the income generated by their retirement portfolio. Most will need to invade that principle. This is where volatility can hurt.

If a 4 percent withdrawal meets your needs today, what happens tomorrow when the market drops 20 percent? Selling into a falling market to pay anticipated retirement expenses is never a good thing.

Prior to retirement, you could ride out market swings by holding onto stocks when prices are depressed. By taking that 4 percent withdrawal, you negate the chance to recapture your lost wealth during the usual bounce back.

Selling means losing that lost wealth forever.

Here’s how to avoid this peril.

By the time your retirement lies within five years, you have a fairly confident idea what your expense needs will be in the first two to three years of retirement.

So, for those last five years before you retire, start building up your cash reserves with the goal of having those two to three years’ worth of retirement spending saved in cash by the time you retire.

This way, if the market goes down, you know you’ve got the cash to pay for those expenses you’ve long dreamed of affording. Better yet, you can continue to replenish those cash reserves when the market is rising.

Why is it important to save two to three years’ worth of expenses? That’s the time it usually takes for the market to fully recover from a correction. This allows retirees to continue to fully fund their retirement as anticipated without worrying about market gyrations.

There you have it. Post-retirement asset allocation made incredibly simple.

This goal-oriented target of “organic” portfolio theory may be what finally replaces “modern” (remember, it’s so old it practically predates Elvis) portfolio theory.