Sequence-of-returns risk
The risk that bad market years early in retirement do lasting damage, because you sell investments at low prices to live.
Two retirements with the same average return can end very differently depending on the order of good and bad years. Keeping a cash buffer, spending less in bad years and a lower starting withdrawal rate all reduce this risk.
Tools that use it
Related terms
- DrawdownA fall in value from a previous high, for example a 30 % drop in the stock market.
- Safe withdrawal rateThe share of your savings you can spend in the first year of retirement, then adjust for inflation, without running out.
- GuardrailsA withdrawal method that spends a little less after bad years and a little more after good ones, within set limits.
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Investing
Sequence risk: why the first ten years of retirement decide
Two retirees, the same average return and very different outcomes. How the order of returns can break a plan and what early retirees can do about it.