Guide
Sequence of returns risk.
Two portfolios can earn the same average return and produce very different retirement outcomes. The order of returns matters once withdrawals begin.
During working years, bad markets can be uncomfortable but new contributions buy more shares at lower prices. In retirement, withdrawals reverse that math. Selling investments after a decline can lock in losses and leave fewer dollars invested for a recovery.
This is why the calculator includes volatility and Monte Carlo scenarios. A simple average-return projection can look clean, but it does not show the damage that can happen when weak markets arrive early.
The first five to ten years of retirement often deserve special attention. If the portfolio survives that period with room to spare, later retirement years may be easier to manage. If early losses combine with high withdrawals, the plan can become fragile quickly.
Cash buffer
Some retirees keep short-term spending outside volatile assets so they are not forced to sell stocks during every downturn.
Flexible spending
Reducing travel or other optional spending after a down year can lower pressure on the portfolio.
Lower withdrawal rate
A more conservative withdrawal rate usually requires a larger starting portfolio but can improve resilience.
How to test it
Run the calculator with the same expected return but different volatility assumptions. If the success rate falls sharply as volatility rises, your plan is sensitive to sequence risk.
Test volatility assumptions