← Learn

Learn

Sequence-of-returns risk, explained

Why the order of returns matters most right around retirement.

Two retirees can earn the same average return over 30 years and end up in very different places. The difference is when the good and bad years happen.

Why order matters

While you're saving, a market drop lets you buy cheaper. Once you're withdrawing, a drop early in retirement forces you to sell more shares to cover spending, leaving less to recover when markets rebound.

Ways people manage it

• Holding a cash or bond buffer for near-term spending
• Flexible spending rules in down years
• Delaying Social Security to raise guaranteed income
• Working part-time for a few early years

Testing your plan

A sequence-of-returns stress test replays your plan with poor returns in the first years. Monte Carlo simulation runs many randomized market paths to estimate how often a plan succeeds. Both are in Retirement Fastlane Premium.