You can average a 6% annual return in retirement and still have a very different outcome depending on when those returns occur.
That’s the idea behind sequence-of-returns risk and it becomes especially important in the years immediately before and after retirement.
In this example, two retirees each start with $500,000, withdraw $35,000 per year, and experience the exact same investment returns over 10 years, just in the opposite order.
After 10 years:
Investor A: $337,734
Investor B: $485,532
That’s nearly a $150,000 difference, despite both experiencing the same average annual return.
The difference? Timing.
As you transition from accumulating assets to relying on your portfolio for income, managing when and where withdrawals come from can become just as important as investment performance.
This video explains sequence-of-returns risk and why it should be considered when building a retirement income strategy.
