Sequence of Returns Risk
The danger that poor market returns early in retirement permanently shrink your portfolio.
Sequence of returns risk is the risk that the order of investment returns — not just their average — hurts a retiree who is withdrawing money. Big losses in the first years of retirement, combined with withdrawals, can deplete a portfolio even if long-run average returns are fine.
Examples
- Two retirees with the same average return can end very differently based on early losses.